Category Archives: World

(EUobserver) IMF warns global trade war could cost $430bn

(EUobserver) The global economy could suffer a $430bn loss in GDP as a result of a trade war between the US and the rest of the world, the International Monetary Fund has warned, adding that the US itself would be “especially vulnerable”, the Guardian reported. The IMF said the new tariffs risked lowering global growth by 0.5 percent by 2020, and the US would find itself “the focus of global retaliation”.

(Prospect) How economists predicted the wrong financial crisis

(ProspectIt is often said that economists failed to see a crisis coming in 2008. That is only half true

It’s not that economists didn’t see a crash coming—they just didn’t see the crash that happened. Photo: Max Pixel

As the 10th anniversary of the fall of Lehman Brothers approaches, many books on the financial crisis will be published. Few are likely to match Adam Tooze’s Crashed in scope, ambition or rigour. This is truly contemporary history—the book runs right up to the end of 2017. It is hard to think of another author who can write as authoritatively on such a wide range of subjects—from the workings of the credit default swap market to the intricacies of Italian politics and the geopolitics of Ukraine.

Tooze, an Anglo-German historian based in the US, is best known for his work on the first half of the 20th century: The Wages of Destruction (2006), a revisionist account of the Nazi economy and war effort; and 2014’s The Deluge dealt with the aftermath of the First World War, and the reshaping of the global order in the 1920s. So Crashed might, at first sight, seem like a radical departure. But the essential themes are familiar territory for him: the interactions of economics, finance and geopolitics—and how the world order is reshaped by catastrophe.

The twist is that Crashed examines the financial crisis through a new lens: a sharp focus is kept on bank balance sheets, and the (often cross-border) capital movements between them. This is less a work of contemporary macro-economic history and more a work of contemporary macro-financial history.

The global depression of the 1930s can be understood in a traditional macro-economic framework—in terms of nation states, the collapse in their willingness to invest and consume, and the knock-on effect on their national income and budgets. Many have tried to explain our crisis in the same old frame. But in truth, it was different.

The integrated global economy of the 1990s and 2000s cannot be understood by focusing on what’s going on within and between nation states; instead you need to concentrate on the macrofinancial “interlocking matrix” of bank balance sheets, and how money flows between them—often without much regard for national borders. Capital controls had, after all, ceased to operate a generation or more earlier in most of the west: Britain’s were abolished in 1979 by Margaret Thatcher.

As Tooze sees it, switching our attention to the macrofinancial carries a number of implications: finance comes to be seen not as something that grows out of the “real economy,” but rather as an independent cause of change within it. It becomes necessary to grapple with the arcane structures of banks, shadow banks and still stranger institutions in the financial system, and to recognise that it is this private system—dependent though it is on central banks—that is in charge of the world’s supply of money.

Financial flows around the world have grown out of all proportion to output, trade or anything else. The world and its banks have been woven together in a credit nexus, which had many effects, both good and ill—and also created a new potential for a great unwinding. As Tooze writes: “What the Europeans, the Americans, the Russians and the South Koreans were experiencing in 2008 and the Europeans would experience again after 2010 was an implosion in interbank credit.”

It is often said that economists failed to see a crisis coming in 2008, but this is only half true. Before 2008 there was, as Tooze shows, a rising chorus of voices warning a crisis was imminent. The problem was that they predicted the wrong crisis. Using the old macroeconomic lens, they foresaw a crisis in which the patience of creditor countries like China would suddenly snap with persistent spendthrift societies and -deficit nations, such as the US. But it turned out the crisis we got wasn’t about countries’ trading surpluses or national debts: it was about the sudden faltering of flows of purely private finance around a remarkably integrated international banking system.

The roots of the supposed crisis and the crisis we actually got in 2008 can both be traced back to the breakdown of the Bretton Woods system, which governed the global economy from the end of the Second World War until the early 1970s. Under Bretton Woods the value of the dollar, the anchor of the global monetary system, was nominally tied to gold while other currencies were pegged to the -dollar. Cross-border capital movements were severely curtailed. When the costs of maintaining that system became too high for the US, Nixon unilaterally dropped the dollar’s gold peg and the whole system fell apart. In the 1970s, for the first time in modern monetary history, no currency was limited by the need to maintain its value against a metallic standard. The result was a staggering rise in inflation, which in the UK in 1975 exceeded 25 per cent.

The eventual settlement—which in its original form was known as monetarism, and later “neoliberalism”—was to replace gold as an anchor with the “logic of discipline.” Government budgets, it was argued, should strive for balance, central banks should keep inflation low.

By the mid-1990s, policy-makers across the developed economies were heaping praise on themselves for achieving “the Great Moderation.” Growth was steady and (outside of asset and real estate prices) inflation was low.

But amid the mutual backslapping at the G-7 summits and IMF meetings, the more nervous policy wonks began to fret about what were termed “global economic imbalances.” In particular, by the mid-2000s, the US was consistently running a large trade deficit—essentially financed by dollars it could print without needing anything to back them up, for so long as it could persuade the world they were worth what they claimed to be. That sounded like an almighty hole in the supposed logic of discipline, and with the US running a widening budget deficit alongside the trade -deficit, the concern grew that the US could soon face a Wile E Coyote moment: that, like the hapless cartoon character pursuing Road Runner, the US economy had already run off the edge of the cliff but hadn’t yet realised it was no longer on solid ground. Eventually, many believed, the Chinese and other foreign investors would cease to regard bonds issued by Washington as a safe haven to invest in, and also lose confidence in the dollar as a store of value. The result would be a crash in the dollar’s value, a sharp rise in US interest rates and a large pickup in inflation.

What actually happened after 2008 was almost the polar opposite: the dollar surged, interest rates collapsed and the looming threat was not inflation, but severe deflation. Concerns before 2008 had concentrated on US public debt—but it was private debt that was the canary in the coal mine. In the early days of the crash, it was called the “subprime crisis,” because the trouble started when the markets woke up to the fact that cleverly repackaging mortgages owed by “subprime” borrowers (people who would struggle to repay) didn’t turn them into fundamentally safe assets. Before long, however, it was not a niche subprime crisis, but a “global financial crisis” and indeed a “Great Recession.” Subprime turned out to be a mere catalyst, not the underlying cause.

Sure, subprime lending in the US was important, and so too was financial innovation—if such lending practices can really be termed “innovation.” But that innovation was itself dependent on wider global forces. The 1990s had seen a series of crises in emerging markets—Mexico in 1994, Thailand, South Korea and Indonesia in 1997, Russia in 1998, Brazil in 1999 and Argentina in 2002. In each case investors had suddenly lost confidence and stampeded out, crashing asset prices and the currency’s value and leaving recession and the need for an IMF bailout in their wake.

China had no intention of being a victim of such an outcome. Its solution was to keep the value of its currency artificially low, which made its imports competitive and thereby enabled it to run big trade surpluses, through which it could acquire its own stock of foreign currency reserves—a buffer against ever needing the IMF. Between 2000 and 2009 the annual value of China’s trade surplus with the US rose to a colossal $227bn. To hold the value of the renminbi down against the value of the dollar, the Chinese authorities had to continually buy dollars and sell renminbi. In 10 years they acquired £1.19 trillion worth of financial claims on the US.

The logic of the global economy had been flipped on its head. Rather than capital flowing from rich nations to poor ones seeking a better return, poor farmers and factory workers in China were essentially financing the higher standard of living in the United States—funding their borrowing and subsidising their imports. This was vendor financing—when a sofa company, for example, lends you the money to buy its products—on a continental scale.

This was the source of what Federal Reserve Chair Alan Greenspan called his “conundrum.” In the mid 2000s, the Fed was raising interest rates as it sought to cool a growing economy and keep inflation in check. Despite more than a dozen hikes in short-term interest rates, the longer-term interest rates the government can borrow at—which, in theory, should depend on the market’s expectations of the path of short-term rates—refused to budge. Such was the insatiable demand of Chinese (and other surplus countries’) foreign reserve managers for US government debt that those long-term rates remained low.

The US financial system was awash with cash, and since the rates of return on government bonds were low, that cash had to be put to work elsewhere to gain a decent return. Whereas traditional macroeconomics might emphasise bubbly demand for credit during times when the mood is good, Tooze’s perspective is more concerned with the need of the great glut of Asian savings in a globalised economy to find somewhere to go. The result was subprime mortgages.

It stepped up another gear when the credit rating agencies, those supposed guardians of prudence, gave their blessing to the complex engineering, which essentially argued that adding together lots of risky investments into one investment created a less risky end product. But that was just the twist. The basic peril of the great flood of money from China was not that this tide of cash could suddenly turn; the real peril was the mood of abandon it induced in western banks.

This story of Chinese capital flows as the root of the crisis is an excellent starting point. Crashed becomes even stronger when it adds European banks to the picture.

Subprime mortgage origination, engineering and selling-on was a profitable business in the 2000s and the Europeans wanted a piece of the action. German banks were especially keen—and not just giants like Deutsche Bank, but smaller regional German Landesbanken too. Around one third of all the riskiest mortgage backed securities was issued by British or European banks.

Traditional macroeconomic analysis tends to focus on the flow of capital from China to the US, which is the corollary of its national trade surplus. But using a macrofinancial lens—which focuses less on national borders, and more on where the money is flowing—gives a clearer view. Capital may have been flowing into the US, but its financial system was part of a much larger trans-Atlantic banking system. By 2007, European banks had claims worth $2.6 trillion on the US banking system, while US banks had claims on the Europeans worth $1.6 trillion. As Tooze writes, for all the attention given to Asian money flows into the US before 2008, “the central axis of world finance was not Asian-American but Euro-American.” The upshot is that the European banks were just as implicated as US ones.



Some Europeans might like to think of 2008 as a story of the US spreading its contagion to Europe, and of the later euro-crisis of 2010-12 as a nasty complication, but in Tooze’s view, this is totally misses the point. For the original lending boom in the eurozone was just as spectacular as in the US. And as Tooze notes, “The flow of funds around Europe, as around the global economy, was driven not by trade flows but by the business logic of bankers, who compared the cost of funding and the expected return.”

The traditional post-crisis narrative that funds flowed mainly from the industrious and thrifty “core” economies of the eurozone to the more cavalier “periphery,” obscures as much as it reveals. In reality, Europe replicates in miniature the global picture ahead of 2008: while economies were still, to a large regard, “nationalised,” finance had become “globalised.”

Tooze is scathing about how this story of irresponsible bank lending in Europe was rewritten into a story of irresponsible borrowers; and how a crisis of American-European finance was somehow refashioned into a crisis of public debt. This analysis is unlikely to win him many friends in official circles in Berlin or Brussels.

The crisis was global and so were the (partial) solutions eventually found. Tooze notes the centrality of the efforts of US central bankers in bailing out the dollar-based system, not just through electronically creating money (quantitative easing) at home, but also through the very quiet -provision of “swap lines” to other central banks. These swap lines give them direct access to dollars with which to support their own financial sectors (as he wrote about in Prospect’s August 2017 issue in “The secret history of the banking crisis”).

Crashed shines a much-needed light on this crucial global role of the dollar in the global economy. It is still absolutely central, which produces tension because it is inevitably managed—in general—not for the global good but for the benefit of the US. When the Fed is setting interest rates its primary concern is the domestic economy. They are, of course, not blind to the impact that the value of the dollar has on other countries but, in the jargon, these are regarded as the international “spillovers” of their monetary policy, which matter if they then “spillback” on to the US.

If a hike in rates, for example, was likely to hammer Mexican growth in a manner that would damage US exporters, then that will be taken into account—but only to that extent. In effect, a technocratic panel in DC is making decisions that will have a large impact on the lives of workers in countries as diverse as Mexico and Turkey. This has had, as we have seen in recent years, profound political consequences with populists and strongmen in the ascendant.

Towards the end of the book, Tooze casts his eye to the future. He wonders how Trump would have dealt with 2008. If another crisis does hit, then the US’s seeming abdication of global leadership, coupled with the eurozone’s failure to provide an alternative, may not make for a bright outcome. For the origins of the next crisis, he calls on us to look “not to America and Europe, the old hub of transatlantic globalisation, but to China and the emerging markets, where the future of the world economy will be decided.”

The closing chapters—covering Brexit, Trump, Emmanuel Macron and the 2017 German election—end abruptly with the publisher’s deadline. The Italian election earlier this year, in which populists triumphed, coupled with the new trade war started by Trump, feel like the start of the next, as yet unwritten, chapters.

Indeed, Tooze may have taken on a Sisyphean task in attempting to write a history of the crisis. As he himself notes rather chillingly, a 10-year anniversary publication on how the 1929 crash had reshaped global politics would have been published in 1939. But whatever happens next, Crashed is likely to stand the test of time as the best history of 2008 written in its immediate shadow.

Crashed: How a Decade of Financial Crises Changed the World by Adam Tooze is published by Allen Lane, £30

(BBG) Stocks Sink on Trade War Escalation; Dollar Gains: Markets Wrap

(BBG) Stocks slumped, the dollar gained and commodities slid with emerging-market assets as markets prepared for another escalation in the burgeoning trade war between the U.S. and China.

S&P 500 futures headed for their biggest drop in two weeks, the Stoxx Europe 600 Index ended its best run since March and the MSCI Asia Pacific Index fell after the Trump administration released the biggest list yet of Chinese goods it may hit with tariff increases. The Asian nation vowed to retaliate, and shares in Shanghai led the retreat as the yuan weakened.

The potential escalation spurred advances in the greenback, Treasuries and most European government bonds. Stocks and currencies in emerging markets both declined, while metals bore the brunt of the reaction in commodities. Copper, nickel and zinc all tumbled.

Follow our live blog as China responds to latest tariff threats.

China’s Commerce Ministry described the U.S. move as “totally unacceptable” bullying, and promised to lodge complaints at the World Trade Organization without detailing what its retaliatory steps would be. One pattern seen so far in the escalating battle between the world’s top two economies is that the tensions hit Chinese shares harder than American ones — they are now in a bear market, while the S&P 500 is within about 3 percent of a record high.

“In the short run it’s very difficult to see what’s going to bring an end to this escalation of tit-for-tat,” Richard Turnill, chief investment strategist at BlackRock Inc., told Bloomberg TV in Hong Kong. “It’s those increasing concerns that are going to weigh on market returns and force investors increasingly to look for more resilience in their portfolios.”

A bumper corporate earnings season may still support sentiment, with expectations that strong results can compliment a recent run of positive economic data and overshadow growth concerns stemming from the trade tensions.

Terminal users can read more in Bloomberg’s Markets Live blog.

Elsewhere, oil dropped below $74 a barrel in New York, even as an industry report was said to show shrinking U.S. crude stockpiles.

These are some events to look out for this week:

  • Earnings season gets into gear with JPMorgan Chase & Co. and Citigroup Inc. among the largest companies due to give results, as well as India’s Infosys Ltd.
  • The most noteworthy U.S. data may be the June inflation report on Thursday, which consensus expects will show both headline and core price growth picking up. There’s another deluge of Treasury debt sales too, with a total $156 billion of notes and bills offered during the week.
  • Chinese trade data due at the end of the week will probably show slightly slower export growth, after early indicators pointed to softer overseas demand and weaker export orders, Bloomberg Economics said.

And here are the main market moves:


  • Futures on the S&P 500 were down 0.6 percent as of 7:14 a.m. in New York after dropping as much as 1.1 percent earlier.
  • The Stoxx Europe 600 Index retreated 1.1 percent.
  • The U.K.’s FTSE 100 declined 1.1 percent.
  • Japan’s Topix index dropped 0.8 percent.
  • Hong Kong’s Hang Seng fell 1.3 percent and the Shanghai Composite lost 1.8 percent.
  • South Korea’s Kospi dropped 0.6 percent.


  • The Bloomberg Dollar Index was up 0.3 percent
  • The Japanese yen slipped to 111.23 per dollar.
  • The offshore yuan fell 0.7 percent to 6.6768 per dollar.
  • The euro dropped 0.2 percent lower to $1.1716.


  • The yield on 10-year Treasuries slipped one basis point to 2.84 percent.


  • West Texas Intermediate crude slid 0.7 percent to $73.62 a barrel.
  • Gold lost 0.4 percent to $1,250.89 an ounce.

(BBG) The Key to Saving the Planet May Be Under the Sea

(BBG) Making carbon storage work is critical to fighting climate change. The question is where to put it all.

A Cold War-era joke has an American economist asking a Soviet peer how the communist economy is progressing. “In a word: good” the Russian responds. “In two words: not good.”

So it goes this century with the rapidly changing energy industry. Advances are taking place in clean energy, transport and efficiency that may have rightfully been considered miraculous a decade ago.

But here’s the catch: As fast as everything is proceeding, it’s still not fast enough. The International Energy Agency (IEA) reported last year that a critical technology—capturing carbon dioxide emissions from generators and either burying or otherwise disposing of them—isn’t expanding fast enough. The IEA reported that current “carbon capture and storage” (CCS) facilities are capable of handling just 7.5 percent of the emissions that the world will need eliminated every year by 2025. That’s necessary if nations are to meet the goal of keeping any increase in global warming below 2 degrees Celsius (3.6 Fahrenheit).

In China, researchers have been looking for ways to accelerate CCS. They decided to look out to sea.

On land, CCS isn’t just promising in principle—it’s been shown to work. There will be more than 20 large-scale capture facilities available by the end of the year, according to the Global CCS Institute. But there’s still concern about making sure the CO2, once buried, stays buried. The same can be said for the idea China has about burying CO2 at sea. For companies and countries to exploit the vastness of the ocean floor, they also need some kind of confidence that it’ll stay there.

By studying the long-term interactions of major physical forces in “unconsolidated marine sediment” such as loose silt, clay and other permeable stuff below the sea floor, researchers Yihua Teng and Dongxiao Zhang report that extreme conditions at the bottom of the ocean essentially hold CO2 in place, “which makes this option a safe storage.”

Under great pressure and low temperature, CO2 and water trapped in the sediment below the sea floor crystallize into a stable ice called hydrate. (Through a similar process, energy-rich methane freezes with water beneath the ocean and terrestrial permafrost, a potential source of energy being scrutinized by ChinaJapan, the U.S. and others.) The new paper on CCS demonstrates through simulation that the hydrates become an impermeable “cap” that keeps the CO2 below it from migrating back up to the sea floor.

Peking University’s carbon capture and storage research receives support from the multinational metals, mining, and petroleum company BHP Billiton Ltd., according to the paper.

The research appears this week in the journal Science Advances. The study should provide some confidence, they write, that ocean CO2 storage remains a viable tool in the push to reduce emissions of the most dangerous heat-trapping gas, even as commercialization of the process remains way off. In the meantime, there are other questions to answer, including how CO2 may behave differently under different kinds of geological conditions.

The big assumption, as with most underground CO2 storage scenarios, is that there’s no telling what the Earth’s living geology will do over the centuries and millennia. Fractures in the subsea sediment, either preexisting or created by tectonics or CO2 injection itself, could open a pathway for CO2 to escape—though significant uncertainty remains.

“In our assumption,” they write, “the unconsolidated marine sediment is intact.”

(ZH) Axios Leaks Trump Bill To Blow Up World Trade Organization

(ZH) Following the close of a second quarter that will be best remembered by President Trump’s vacillations on trade, Axioshas dropped a Sunday night bombshell that may spook markets hoping for a respite from the daily escalating trade war rhetoric as the second half of the year begins: White House reporter Jonathan Swan has obtained a copy of a draft bill, purportedly ordered by Trump himself, that would allow the US to “walk away” from its commitments to the World Trade Organization.

If passed, the bill (entitled the “United States Fair and Reciprocal Tariff Act”) would effectively blow up the WTO, an organization that the US helped create back in the 90s, by allowing Trump to unilaterally ignore the two most important principles:

The “Most Favored Nation” (MFN) principle that countries can’t set different tariff rates for different countries outside of free trade agreements;

“Bound tariff rates” — the tariff ceilings that each WTO country has already agreed to in previous negotiations.

“It would be the equivalent of walking away from the WTO and our commitments there without us actually notifying our withdrawal,” one anonymous source reportedly told Axios.

The bill asks Congress to hand over to Trump unilateral power to ignore WTO rules and negotiate unilateral trade agreements.

The leak of the draft bill follows another WTO-related scoop from Axios, published last week, where Swan reported that Trump has repeatedly badgered his aides about pulling the US out of the WTO, which the president has famously criticized as a “disaster”.

The bill’s chances of making it through Congress are extremely low. However, if Trump has taught us anything about his trade agenda, it’s never say never.

  • “The good news is Congress would never give this authority to the president,” the source added, describing the bill as “insane.”
  • “It’s not implementable at the border,” given it would create potentially tens of thousands of new tariff rates on products. “And it would completely remove us from the set of global trade rules.”

Trump was reportedly briefed on the draft in late May. Most of the individuals who were involved in the drafting of the bill assumed it would be “dead on arrival” – that is, all but Trump advisor Peter Navarro, who repeatedly encouraged Trump’s anti-free-trade positions. The White House, the US Trade Representative and the Department of Commerce were consulted during the drafting of the bill.

While the bill might be able to find enough support to pass in the extremely pro-Trump House, Republican proponents of free trade in the Senate would likely balk at the prospect of trashing the existing free trade order,while Democrats would be reluctant to hand more unilateral authority to the president.

It’s also worth noting that Congress is already trying to roll back Trump’s steel and aluminum tariffs in the form of a bipartisan bill authored by Republican Sens. Bob Corker and Pat Toomey and Democratic Sen. Michael Bennet.

  • In a White House meeting to discuss the bill earlier this year, Legislative Affairs Director Marc Short bluntly told Navarro the bill was “dead on arrival” and would receive zero support on Capitol Hill, according to sources familiar with the exchange.
  • Navarro replied to Short that he thought the bill would get plenty of support, particularly from Democrats, but Short told Navarro he didn’t think Democrats were in much of a mood to hand over more authority to Trump.

White House spokeswoman Lindsay Walters acknowledged that the bill was genuine, but cautioned that the public shouldn’t take it too seriously – after all, Trump’s frustrations with the WTO are already widely known.

  • But Walters signaled that we shouldn’t take this bill as anything like a done deal. “The only way this would be news is if this were actual legislation that the administration was preparing to rollout, but it’s not,” she said.
  • “Principals have not even met to review any text of legislation on reciprocal trade.”
  • Between the lines: Note the specificity of Walters’ quote above. Trump directly requested this legislation and was verbally briefed on it in May. But he hasn’t met with the principals to review the text.

The report sent US futures lower off the gate as trade tensions once again reared their ugly head, although the BTFDers promptly emerged, and with their traditional non-challance and disregard for risk or news, quickly sent futures back to unchanged.

(Xinhua) Portugal’s Antonio Vitorino elected as new IOM Director General

(Xinhua) Member states of the International Organization for Migration (IOM) on Friday elected Portugal’s Antonio Manuel de Carvalho Ferreira Vitorino as the IOM’s next Director General.

IOM’s current Director General, William Lacy Swing, will be stepping down after completing the second of two five-year terms.

Vitorino, 61, is expected to begin his directorship on Oct. 1 of 2018.

He was elected to Portugal’s Parliament in 1980. In 1983 he became Secretary of State for Parliamentary Affairs. He subsequently served as Minister for National Defense and Deputy Prime Minister within the government of Antonio Guterres, now the United Nations’ Secretary General.

From 1999 to 2004, Vitorino served as the European Commissioner for Justice and Home Affairs. He has been President of the think tank Notre Europe since June 2011.

Antonio Vitorino earned a degree from the University of Lisbon’s School of Law in 1981, as well as a Master’s Degree in Legal and Political Science.

Established in 1951, International Organization for Migration has over 10,000 staff and over 400 offices in more than 150 countries.

IOM is the UN Migration Agency and is the leading inter-governmental organization in the field of migration.

(StraitsTimes) Portugal, the European country that wants more migrants


Portugal’s Prime Minister Antonio Costa drew resounding applause when he announced that immigrants are welcomed and any xenophobic rhetoric will not be tolerated.
Portugal’s Prime Minister Antonio Costa drew resounding applause when he announced that immigrants are welcomed and any xenophobic rhetoric will not be tolerated. PHOTO: EPA-EFE

LISBON (AFP) – Unlike most European nations, who are trying to reduce the influx of migrants, Portugal is bucking the trend by looking to immigration as a way to counter its declining population.

“We need more immigration and we won’t tolerate any xenophobic rhetoric,” Prime Minister Antonio Costa told activists at a party conference in May, drawing resounding applause.

Demonstrating this openness, Portugal was one of the first that volunteered to take in some of the migrants on board the Lifeline, a rescue ship which had been stranded at sea since June 21 after Italy refused it safe harbour.

And as European leaders struggled to reach a deal at a summit last week over who should take in migrants rescued off the coast of North Africa, Portugal’s socialist government was already taking steps to make itself a more attractive destination.

“It was a very difficult summit and the apparent consensus reached in the deal did not hide the deep divisions which are today threatening the European Union,” Costa said after leaving the summit.

And Friday’s election of former Portuguese minister Antonio Vitorino as head of the International Organiz=sation for Migration “demonstrates the great importance that Portugal places on dialogue about the issue,” the foreign ministry said.

AIM: 75,000 PER YEAR

Costa, whose father was a well-known communist writer descended from an aristocratic family in the former Portuguese colony of Goa in India, has made reviving the declining population a key element of his political programme.

And it will be a central issue for him as the country heads into elections next year in which Costa is the frontrunner.

According to studies quoted by the government, Portugal needs at least 75,000 new residents every year simply to maintain a stable working population, which today numbers just 10.4 million people.

In this context, the government on Thursday adopted a raft of new regulatory measures to simplify the procedures for getting a visa for students or those wanting to create a start-up.

And it also opened the way to regularise the status of some 30,000 foreign nationals who arrived legally in Portugal but do not have any authorisation to work.

During the three years of recession which followed the financial crisis of 2011, more than 300,000 Portuguese left in search of a better standard of living, many of them young university graduates.

In 2017, Portugal registered a positive migration balance – the difference between those leaving and those entering the country – for the first time in six years, the National Statistics Institute said.


Last year, the Portuguese authorities issued 61,400 new residency permits, an increase of 31 percent from 2016, which reflected a six percent increase in the number of foreigners living in the country, a border police report said last week.

The country has also returned to growth, notably thanks to a boom in tourism and foreign investment in property, but business leaders have warned that it could be easily reversed by the lack of skilled labour.

The hard-won deal reached by EU member states on Friday stipulates that migrants rescued at sea should be redistributed among the different member states – on a voluntary basis.

Portugal is already part of a voluntary programme for the redistribution of refugees proposed in January by the European Commission which aims to resettle at least 50,000 refugees over the next two years.

Within the framework of an earlier programme, which ran from 2015 to March 2018, Portugal took in 1,552 refugees.

However, only about half of those who entered Portugal stayed, with the rest leaving for countries offering better economic opportunities.

(BBG) Trade War Could Trigger Global Recession, China and Europe Warn

(BBG) UBS Wealth CIO Mark Haefele discusses the impact of trade frictions on the economy and markets.

China and the European Union vowed to oppose trade protectionism in an apparent rebuke to the U.S., saying unilateral actions risked pushing the world into a recession.

Vice Premier Liu He — President Xi Jinping’s top economic adviser — said China and the EU had agreed to defend the multilateral trading system, following talks Monday in Beijing. The comments, made at a press briefing with European Commission Vice President Jyrki Katainen, come as both sides prepare to face off against President Donald Trump’s tariff threats.

“Unilateralism is on the rise and trade tensions have appeared in major economies,” Liu said. “China and the EU firmly oppose trade unilateralism and protectionism and think these actions may bring recession and turbulence to the global economy.”

Both China and the EU are coming under pressure from Trump, as the U.S. president seeks to remake a global trading system that he sees as rigged against the world’s largest economy.

After months of rhetoric and threats, the trade fight seems to be coming to a head, with Europe imposing tariffs on $3.3 billion of American products Friday in response to U.S. barriers on imports of aluminum and steel. That triggered threats of further tariffs on European cars from Trump.

Investment Curbs

Later this week, the U.S. Treasury Department is expectedto release fresh rules on Chinese investment in technology companies, Bloomberg reported on Monday, putting additional pressure on China — which hit back against the plans. Chinese investment has provided jobs and tax income for the U.S., and it should view commercial activities “objectively,” Foreign Ministry spokesman Geng Shuang told reporters in Beijing on Monday.

The U.S. is due to impose tariffs on $34 billion of Chinese imports from July 6, and Trump has threatened to impose levies on another $200 billion of Chinese goods. If that threat is realized, it could cut as much as half a percentage point off China’s economic growth, and also hit the American economy, economists have said.

Anxiety over the economic fallout is cutting deep in financial markets, with China’s yuan sliding to a six-month low Monday. The S&P 500 Index fell to the lowest since May and the Dow Jones Industrial Average sank for the ninth time in 10 sessions.

As if to reinforce concerns about the economic outlook, the Dutch Bureau for Economic Policy Analysis on Monday published its latest trade monitor, showing world trade momentum dropped in April to the lowest since 2015. The measure has fallen sharply since hitting a seven-year high at the start of 2018.

As the conflict over trade has intensified, China has sought to align itself with Europe as a way of pushing back against the U.S. Both sides agreed in Monday’s talks to promote globalization and forged a consensus on climate change, Liu said.

But despite their alignment against the U.S. trade threat, the EU and China remain at odds over issues including the lack of reciprocal access for European firms and the EU’s reluctance to endorse China’s Belt and Road trade and infrastructure program. As China steps up its engagement in Europe, the EU, too, is working on measures to tighten screening of outside investments to protect critical technologies and infrastructure.

survey released last week by the European Union Chamber of Commerce in China showed that a slim majority of members thought foreign-invested companies are treated unfairly, and almost two-thirds see a lack of reciprocity between the access to China’s markets that they get, and the access Chinese companies get to Europe.

China and the EU will exchange offers related to market access at an upcoming summit in July, Liu said Monday. He also said both sides agreed to connect the Belt and Road initiative to the EU’s development strategies.

The EU and China agreed to set up a working group to update the WTO to better equip it for the contemporary world, Katainen said at a press conference late Monday in Beijing. While the details have yet to be decided, the EU hopes the working group is at vice-minister level, he said.

In what Katainen described as “a big step forward,” the two sides will also exchange a list regarding a bilateral investment agreement at the upcoming summit. Still, that doesn’t mean the accord will be reached immediately, with different views outstanding on overcapacity, forced technology transfer and cyber security, he said.

(NYT) What’s the Yield Curve? ‘A Powerful Signal of Recessions’ Has Wall Street’s Attention

(NYT) You can try and play down a trade war with China. You can brush off the impact of rising oil prices on corporate earnings.

But if you’re in the business of making economic predictions, it has become very difficult to disregard an important signal from the bond market.

The so-called yield curve is perilously close to predicting a recession — something it has done before with surprising accuracy — and it’s become a big topic on Wall Street.

Terms like “yield curve” can be eye-watering if you’re not a bond trader, but the mechanics, practical impact and psychology of it are fairly straightforward. Here’s what the fuss is all about.

First, the mechanics.

The yield curve is basically the difference between interest rates on short-term United States government bonds, say, two-year Treasury notes, and long-term government bonds, like 10-year Treasury notes.

Typically, when an economy seems in good health, the rate on the longer-term bonds will be higher than short-term ones. The extra interest is to compensate, in part, for the risk that strong economic growth could set off a broad rise in prices, known as inflation. Lately, though, long-term bond yields have been stubbornly slow to rise — which suggests traders are concerned about long-term growth — even as the economy shows plenty of vitality.

At the same time, the Federal Reserve has been raising short-term rates, so the yield curve has been “flattening.” In other words, the gap between short-term interest rates and long-term rates is shrinking.

On Thursday, the gap between two-year and 10-year United States Treasury notes was roughly 0.34 percentage points. It was last at these levels in 2007 when the United States economy was heading into what was arguably the worst recession in almost 80 years.

As scary as references to the financial crisis makes things sound, flattening alone does not mean that the United States is doomed to slip into another recession. But if it keeps moving in this direction, eventually long-term interest rates will fall below short-term rates.

When that happens, the yield curve has “inverted.” An inversion is seen as “a powerful signal of recessions,” as New York Fed President John Williams said earlier this year, and that’s what everyone is watching for.

Every recession of the past 60 years has been preceded by an inverted yield curve, according to research from the San Francisco Fed. Curve inversions have “correctly signaled all nine recessions since 1955 and had only one false positive, in the mid-1960s, when an inversion was followed by an economic slowdown but not an official recession,” the bank’s researchers wrote in March.

Even if it hasn’t happened yet, the move in that direction has Wall Street’s attention.

“For economists, of course it’s always been traditionally a very good signal of directionality of the economy,” said Sonja Gibbs, senior director of capital markets at the Institute of International Finance. “That’s why everyone is bemoaning the flattening of the yield curve.”

Recession? Really?

Sure, it seems like a strange time to be worried about recession. Unemployment is at an 18-year low, corporate investment is picking up steam, and consumer spending shows signs of rebounding.

Some economists on Wall Street think the economy could be growing at around a nearly 5 percent annual clip this quarter. But if the current economic vigor is only reflecting a short-term stimulus coming from the Trump administration’s tax cut, then some kind of slowdown is to be expected.

“It’s very hard to see what’s going to goose the economy further from these levels,” Ms. Gibbs said.

And the financial markets can sometimes sniff out problems with the economy before they show up in the official economic snapshots published on G.D.P. and unemployment. Another notable yield curve inversion occurred in February 2000, just before the stock market’s dot-com bubble burst.

In that sense, the government bond market isn’t alone. Stocks have been in a sideways struggle since the Standard & Poor’s 500 last peaked on Jan. 26. Returns on corporate bonds are negative, as are some key commodities tied to industrial activity.

An important caveat to the predictive power of the yield curve is that it can’t predict precisely when a recession will begin. In the past the recession has come in as little as six months, or as long as two years after the inversion, the San Francisco Fed’s researchers note.

In other words, there’s a reason to look at the yield curve skeptically, despite its prowess at predicting recessions.

The new fear gauge.

As in all market moves, perceptions of its significance mean the yield curve can sometimes become a feedback loop.

If enough investors begin to grow concerned about a recession, they will likely put more and more money into the safety of long-term government bonds. That buying binge which would likely help flatten, or invert, the yield curve.

Then people will write articles about the curve sending a stronger signal on recession. And that could, in turn, drive even more people to buy into long-term bonds. Rinse. Repeat.

There’s also a practical impact.

But it’s not just psychology. The yield curve helps determine some of the decisions that are the most crucial to the health of the American economy.

Specifically, the flattening yield curve makes banking, which is basically the business of borrowing money at short-term rates and lending it at long-term rates — less profitable. And if the yield curve inverts, it means lending money becomes a losing proposition.

Either way, the flow of lending is likely to be curtailed. And in the United States, where borrowed money is the lifeblood of economic activity, that can slam the brakes on economic growth.

The Fed’s hand.

There is an argument to be made against reading too much into the yield curve’s moves — and it hangs on the idea that, rather than the free market, central banks have had a big influence on both the long-term and short-term rates.


Since the last recession, central banks bought trillions of dollars of government bonds as they tried to push long-term interest rates lower in order to lend a helping hand to the economy.

Even though they’re reversing course now, central banks still own massive amounts of those bonds, and that may be keeping long-term interest rates lower than they would otherwise be.

Also, the Federal Reserve has been raising short-term interest rates since December 2015 and has indicated it will keep doing so this year.

So if long-term rates were pushed lower by central bank bond buying, and now short-term rates are being pushed higher as the Fed tightens its monetary policy, the yield curve has nowhere to go but flatter.

“In the current environment, I think it’s a less reliable indicator than it has been in the past,” said Matthew Luzzetti, a senior economist at Deutsche Bank.

(SkyNews) Donald Trump nominated for Nobel Peace Prize by Norwegian politicians

(SkyNews) Bookmakers have slashed the odds on the US president winning the award after his summit with Kim Jong Un in Singapore.

Donald Trump sums up his historic summit with Kim Jong Un
Image:Donald Trump’s summit in Singapore could land him the Nobel Peace Prize

Donald Trump has been nominated for the Nobel Peace Prize by two Norwegian politicians after his historic meeting with Kim Jong Un.

Christian Tybring-Gjedde, an MP, and former justice minister Per-Willy Amundsen said Mr Trump “had taken a huge and important step in the direction of the disarmament, peace and reconciliation between North and South Korea”.

Both men are politicians with the anti-establishment Progress Party.

A group of US Republican politicians nominated Mr Trump for the prize in May.

The process of considering candidates for the honour is carried out in Norway, and nominations must be sent to the Nobel committee before February.

Mr Trump’s recent backing from Norwegian and US politicians therefore serve as nominations for the 2019 prize.

Each year the winner is announced on the Friday of the first full week of October.

SINGAPORE - JUNE 12: In this handout photo, North Korean leader Kim Jong-un (L) meets U.S. President Donald Trump during their historic U.S.-DPRK summit at the Capella Hotel on Sentosa island on June 12, 2018 in Singapore. U.S. President Trump and North Korean leader Kim Jong-un held the historic meeting between leaders of both countries on Tuesday morning in Singapore, carrying hopes to end decades of hostility and the threat of North Korea's nuclear program. (Photo by Kevin Lim/THE STRAITS TIM
Image:Donald Trump and Kim Jong Un agreed on denuclearisation at their summit in Singapore

The committee cannot publicly reveal who has been nominated, so it is unclear if Mr Trump is in the running to scoop the prize in 2018.

Mr Trump’s Norwegian nominations come after UK bookmakers slashed the odds of him winning after his summit with Kim Jong Un in Singapore.

Sky Bet is offering odds of the US president winning the award this year at 8/1, while it puts the chances of him winning the prize alongside someone else at 5/4.

Donald Trump blows out the candle on his birthday cake
Image:Donald Trump blows out the candle on his birthday cake

Mr Trump and Mr Kim pledged to work towards the complete denuclearisation of the Korea peninsula at the summit on the resort island of Sentosa.

US secretary of state Mike Pompeo admitted there was still “a lot of work left to do”, with the US wanting to see “major disarmament” of North Korea within two and a half years.

Mr Pompeo has also said sanctions on North Korea will not be eased until the country has denuclearised.

The UK foreign secretary Boris Johnson said in May that Donald Trumpdeserves to be in the running for the honour if he can “fix” North Korea and the Iran nuclear deal.

The foreign secretary, who was speaking on a trip to Washington DC, said: “If he can fix North Korea, and he can fix the Iran nuclear deal, then I don’t see why he’s any less of a candidate for the Nobel Peace Prize than Barack Obama, who got it before he even did anything.”

Mr Obama was awarded the prize in 2009 less than a year after entering office.

Mr Trump has been tipped for the award as he celebrates his 72nd birthday on Thursday.

He was the second oldest person to assume the US presidency when he took office in 2017. Ronald Reagan was 73 when he was re-elected in 1984.

(GUA) US, Canada and Mexico beat Morocco in vote to host 2026 World Cup


Delegates of Canada, Mexico and the United States celebrate after winning a joint bid to host the 2026 World Cup.
 Delegates of Canada, Mexico and the United States celebrate after winning a joint bid to host the 2026 World Cup. Photograph: Pavel Golovkin/AP

The 2026 World Cup will be held in the United States, Canada and Mexico after they beat Morocco by a margin of 69 votes to host the tournament which will be expanded to 48 teams for the first time.

The Moroccan bid used its final address to Fifa congress to point out the country has a ban on weapons and would not hike up ticket prices to increase profit, a thinly veiled swipe at its rivals. But it was not enough to sway the room as it lost the vote, with the United 2026 bid receiving 134 votes to its 65.

Donald J. Trump


The U.S., together with Mexico and Canada, just got the World Cup. Congratulations – a great deal of hard work!

The United States-led bid was judged by a Fifa taskforce to be vastly superior to its north African rivals on technical grounds, with a total of 23 stadiums, already built or under construction, at its disposal. Morocco, while enticing some federations with its commitment to fan engagement in a footballing nation, would have had to build or renovate all of the 14 stadiums in its bid book.

That difference – alongside the promise of £4bn in extra profit for the federations – was enough to convince some undecided voters to side with the United 2026 campaign, which opened its final 15-minute pitch by handing the stage to Alphonso Davies, a 17-year-old Canadian born in a Liberian refugee camp in Ghana. “In Canada, they’ve welcomed me and I know they’ll welcome you,” he said.

Of 211 federations, 203 submitted a vote. That number accounted for the four bidding nations who were ineligible, plus three American-governed territories who abstained because of a perceived conflict of interest plus Ghana, who did not attend congress after corruption allegations. The way the federations voted was made public for the first time, perhaps the most surprising revelation being Russia voting for the United 2026 bid despite political tensions between the nations.

The Fifa heirarchy, including the president, Gianni Infantino, preferred the North American bid which has promised to generate around an $11bn (£8.24bn) profit for Fifa compared to the projected $5.7bn (£4.48bn) a Morocco World Cup would raise. The Moroccans had been keen to emphasise its more fan-friendly pricing in contrast with the United 2026 bid which stated an average ticket price of $431 (£322), a significant increase on the Brazil and Russia World Cups.

It was the first World Cup vote since 2010, when the FA suffered humiliation after Russia won the right to host the 2018 tournament. Allegations of corruption immediately followed that vote with Qatar securing the 2022 event. The prospect of a more controversy-free World Cup also swayed Fifa in favour of the United 2026 bid.

Infantino took the opportunity to claim the Fifa landscape has drastically changed since he succeeded Sepp Blatter. “It was clinically dead when I took over two years ago,” he said. “Now it is alive. There are no longer additional costs in the balance sheet.”

Proceedings at congress, held at Moscow’s Expocentre on the outskirts of the city centre, came to an unexpected halt halfway through as Infantino announced the arrival of Vladimir Putin. Most of the hall rose to their feet to greet the arrival of the Russian president but the FA delegation, led by the chief executive, Martin Glenn, remained seated. Putin offered little alternative to David Gill, the English Fifa council member, but to shake his hand as he made his way along the line of those on the stage.

Eight years ago when Russia was awarded the 2018 World Cup in Zurich, Putin spoke mainly in English as he thanked the audience “from the bottom of my heart”. He struck a different, more serious tone this time round although he was full of praise for Infantino, calling him a “good front man and true fighter”. Infantino responded in kind, thanking Putin “on behalf of the entire world of football … from the bottom of our heart a big thank you for your engagement, for your passion, for really making us feel part of the same team”.

Putin closed his speech by saying in English: “Welcome to Russia.”

(PUB) O Museu das Ex-Descobertas – Fernando D’Oliveira Neves

(PUB) Parece que como o mar já existia, não descobrimos nada, e portanto não temos nada de que nos orgulhar nem lembrar no Museu das Descobertas. Eu pensava que sim.

Não sei como alguém teve a ideia de chamar Museu das Descobertas a um museu sobre as Descobertas, que parece que afinal não descobrimos, pois quem estava nos sítios que nós descobrimos já se tinha descoberto. Não é caso único. Lembro-me, quando se preparava o bicentenário da descoberta da América pelo Colombo, de ver na televisão um mexicano, loiro de olhos azuis, a dizer que a América não tinha sido descoberta, porque eles já estavam na América e por isso não precisavam de ser descobertos. Como chegaram loiros de olhos azuis ao México, antes do tonto do Colombo chegar à América, a pensar que tinha chegado à Índia, ele não explicou.

Mas não é por isso que acho mal chamar Museu das Descobertas ao Museu das Descobertas. É por razões comerciais. Como todos sabem, o dinheiro é o único valor, repito, único, da nossa sociedade. Ora, qualquer pessoa que por estes tempos mais quentes passeie por Lisboa verificará, facilmente, que Lisboa é um verdadeiro Museu das Descobertas ao ar livre. Ele há-as velhas, novas, altas, baixas, gordas, magras, loiras, morenas, ruivas, chinesas, italianas. Até portuguesas. Lisboa está cheia de descobertas fantásticas. Para que é que alguém, podendo ver as descobertas ao ar livre e sem pagar, há-de entrar num prédio e pagar bilhetes para ver descobertas? Só se for para apanhar um bocado de ar condicionado. Porém, se o ar condicionado estiver muito frio, as descobertas cobrem-se e o visitante, além de pagar, vê as descobertas cobertas, o que não tem graça nenhuma.

Acresce que aquilo que nós achamos que foi a nossa glória, a expansão, o encontro de outras terras, o cruzamento com outros povos e costumes, onde deixámos a nossa marca e trouxemos as deles, foi uma coisa horrenda pela qual temos de pedir desculpa. É verdade que andamos a cortar narizes pelo Índico, a bombardear inocentes, a impor a nossa fé e a traficar escravos. Mas, infelizmente, a normalidade da maior parte da vida da humanidade foi mais próxima do que hoje se passa na Síria do que na Suíça. A História mostra-nos que estropiar e matar gratuitamente era o desporto favorito da maioria das “ditas” civilizações de todos os quadrantes e de todas as religiões e que se tratava de façanhas laureadas e não condenadas. A escravatura é, e era, hedionda. Mas era praticada por todos os povos e nós tanto escravizávamos, como éramos escravizados. Fernão Mendes Pinto sete vezes foi cativo. E cativo queria dizer escravo, no tempo em que ele escreveu. E tudo isso ocorreu antes de haver o conceito de Direitos Humanos, ou mesmo de Direitos, e não faz sentido interpretar esses tempos, reconhecidamente bárbaros, à luz dos valores do nosso também bárbaro, e por isso mais repreensível, tempo.

O nosso passado esclavagista é vergonhoso e revoltante, sobretudo no período em que mantivemos o tráfico quando já era uma prática reprovável. Mas antes disso, como confirma o único relato existente de um escravo africano levado para os Estados Unidos, os escravos não eram capturados pelos europeus, mas pelas tribos africanas que os vendiam aos chamados negreiros. E não era melhor a sorte dos que não eram vendidos, como testemunham relatos da época.

Parece então que quando se descobre uma coisa, não se descobre, porque essa coisa já existia, embora nós não soubéssemos que ela existia. Ora eu pensava justamente que descobrir era encontrar o que não sabíamos que existia. Pensava que tínhamos descoberto a Madeira, que ninguém sabia que existia e onde não havia ninguém. Mas afinal havia as cagarras que descobriram a Madeira antes de nós. Como pensava que tínhamos descoberto o Brasil, que afinal já tinha sido descoberto pelos índios que lá viviam, que nos descobriram quando nos viram, pois não se davam com mais ninguém, e ainda hoje não devem ter descoberto porque lhes chamam índios, que são os povos da índia que o papalvo do Colombo pensava que era nas Caraíbas.

A Índia, essa sim, já sabíamos que existia e onde era, mas queríamos descobrir como se chegava lá por mar, porque não nos dávamos com os que estavam no caminho por terra, que não nos deixavam passar.

Agora parece que como o mar já existia, não descobrimos nada, e portanto não temos nada de que nos orgulhar nem lembrar no Museu das Descobertas. Eu pensava que sim, pois até historiadores estrangeiros, e todos sabem como é perfeito o tal estrangeiro, achavam ímpares os nossos extraordinários feitos, como o americano Boorstin, librarian da Biblioteca do Congresso, um dos mais prestigiados cargos do país, que considerou a saga da procura do caminho marítimo para a Índia como o primeiro empreendimento científico moderno, que marcou o Mundo para sempre, ou o inglês Toynbee, por muitos considerado o maior historiador do século XX, que dividia o mundo entre a época pré-gamica e pós-gamica, ou seja, antes e depois da viagem do Gama. Viagem que, como é óbvio, deu ao Ocidente cinco séculos de domínio do Mundo, que os Estados Unidos estão a destruir com afinco e os chineses, que sabem de História, querem marcar o termo com a simbólica viagem inversa da nova rota da seda. Mas é claro que o prestígio do Boorstin e de Toynbee caiu a pique em Portugal, por atribuírem mérito a Portugal e aos portugueses, o que é por cá muito mal visto.

Mas lá que andámos por todo o lado e por todo o lado deixámos monumentos, orações, comércio, tradições e comunidades com ligações a Portugal, da foz do Amazonas às ilhas das Flores, lá isso é verdade. Para não falar da língua, a quinta mais falada do Mundo, num país continente e em todos os continentes. Proeza só equiparável à das então três maiores potências europeias e sem paralelo em países da nossa dimensão. Fizemos o impossível. Por isso o melhor é chamar ao Museu das Descobertas Museu da Descoberta de Portugal. Porque só percebe Portugal quem conheça essa nossa História.

(CNBC) Volatility is here — but it’s not the main risk for investors


  • Global stock markets fell as much as 9 percent between January and March, and many investors are unprepared as we enter this more volatile phase of the current bull market.
  • The real risk for private investors is not a volatile market itself — it is abandoning long-term financial goals that align with their life goals.
  • To cope, diversify beyond traditional equity and bond indices; reconsider sources of yield outside of riskier companies; and look beyond your home market.
Tom Naratil, co-president, UBS Global Wealth Management and president, UBS Americas

Bull market volatility

Gopixa | Getty Images

As we reach the midpoint of what’s been an eventful and at times uncertain year, one thing is clear: Volatility has returned.

Global stock markets fell as much as 9 percent between January and March, with implied volatility rising to levels seen only three times since the global financial crisis. Investors with whom I speak question the impacts of a potential end to the credit cycle, the wind-down of quantitative easing, and a rise in inflation.

I’m also finding that many investors are unprepared as we enter this more volatile phase of the bull market. For instance, they are sticking to familiar assets in their home markets when they should also be looking at opportunities globally.

The real risk for individual investors is not a volatile market itself — it is abandoning long-term financial goals that align with their life goals.

This is a vital moment when investors need to remain invested and to manage risks. They should be asking themselves if they are prepared for alternating stretches of volatility and high growth, with a long-term plan in mind.

Today, robust economic expansion is translating into higher corporate earnings growth. (We estimate companies are likely to deliver 10 percent to 15 percent earnings growth globally this year.) Over the long term, equity prices tend to rise in tandem with earnings growth rates. And while risks have surfaced that could end the economic cycle, some of the best returns are made in the later stages of bull markets.

Since 1928, returns in the final year of bull markets have averaged 22 percent, versus 11 percent in mid-bull-market years. But only those with the required degree of patience and perspective realize those gains.

When we fixate on near-term risks, the chances of a costly mistake from “market timing” are higher. Since 1936, even investors with relatively good market timing — those able to consistently sell 10 months before market peaks and buy back 10 months after troughs — have still ended up worse off than investors who remained invested throughout the period.

There are a number of strategies to navigate this part of the cycle: diversifying beyond traditional equity and bond indices; reconsidering sources of yield outside of riskier companies; and looking beyond one’s home market. But investors also need to reframe their notion of risk. Risk is not about day-to-day volatility, but about whether one’s investment portfolio is on track to meet life goals that span decades.

When you reframe risk and opportunity around these goals, you can focus more on investments aligned with long-term trends, especially the dominant global themes of aging, urbanization and population growth.

For example, the latter two are increasing demand for emerging market tourism and infrastructure, making these attractive investment considerations. Similarly, the global “fintech” industry is at a positive inflection point, fueled by rapid urbanization, as well as favorable regulation and strong demand from millennials.

“Times of volatility present opportunities to look at investments that others may not see or choose to consider.”

Sustainable investing is rapidly gathering momentum, too, particularly with a focus on themes that can enhance long-term risk-adjusted rates of return. For example, companies with high standards of corporate governance face fewer tail risks, such as large fines from regulators or reputational damage.

All of these factors show that it is not in investors’ best interests to make snap decisions based on day-to-day market movements. Times of volatility present opportunities to look at investments that others may not see or choose to consider.

As an industry, wealth managers and financial advisors need to ensure our clients avoid unwise market exits that could have a significantly negative impact. Instead, we need to help them to set the right overall asset allocation, frame their unique investment horizon, and work toward their long-term financial security.

(ZH) “Everything Has Gone Wrong”: Soros Warns “Major” Financial Crisis Is Coming

(ZH) In a speech delivered Tuesday in Paris, billionaire investor George Soros warned that the world could be on the brink of another devastating financial crisis, as debt crises reemerge in Europe and a strengthening dollar pressures both the US’s emerging- and developed-market rivals.

And Europe, with Italy dragging worries about the possible dissolution of the euro back to the forefront, won’t be far behind. Political pressures like the dissolution of its transatlantic alliance with the US will eventually translate into economic harm. Presently, Europe is facing three pressing problems: The refugee crisis, the austerity policy that has hindered Europe’s economic development, and territorial disintegration – not only Brexit, but the threat that countries like Italy might follow suit…

 “Brexit is an immensely damaging process harmful to both sides,” the billionaire exclaimed.


But in the near-term, the US’s decision to pull out of the Iran deal is straining Europe’s alliance with its most important Western partner just as the strengthening dollar is constricting financial conditions around the world.

Until recently, it could have been argued that austerity is working: the European economy is slowly improving, and Europe must simply persevere. But, looking ahead, Europe now faces the collapse of the Iran nuclear deal and the destruction of the transatlantic alliance, which is bound to have a negative effect on its economy and cause other dislocations.

The strength of the dollar is already precipitating a flight from emerging-market currencies. We may be heading for another major financial crisis. The economic stimulus of a Marshall Plan for Africa and other parts of the developing world should kick in just at the right time. That is what has led me to put forward an out-of-the-box proposal for financing it.

Soros’s warning comes as Italian 2Y bond yields shoot higher by the most on record:


Adding to the urgency, it is no longer a “figure of speech” to claim that the EU is in “existential danger,” Soros said. It’s an obvious reality.

“The EU is in an existential crisis. Everything that could go wrong has gone wrong,”he said.

To escape the crisis, “it needs to reinvent itself.”

“The United States, for its part, has exacerbated the EU’s problems. By unilaterally withdrawing from the 2015 Iran nuclear deal, President Donald Trump has effectively destroyed the transatlantic alliance. This has put additional pressure on an already beleaguered Europe. It is no longer a figure of speech to say that Europe is in existential danger; it is the harsh reality.”

The only way to prevent an all-out collapse, Soros explained, would be a 30 billion euro ($35.4 billion) “Marshall Plan” for Africa that Soros believes would help stem the flow of migrants into Europe, something that, Soros finally admits, is one of the biggest problems facing Europe.  The EU, Soros believes, should use its “largely unused” borrowing authority to finance the plan.

“We may be heading for another major financial crisis,” Soros said explicitly.

The alternative, Soros claims, is further “territorial disintegration” of the EU as countries that have largely suffered as a result of the monetary union contemplate leaving. To prevent this, Soros says Europe must acknowledge and address the flaws of the euro system. Perhaps the most glaring of which is that the euro created an entrenched two-tiered system of debtors and creditors.

I personally regarded the EU as the embodiment of the idea of the open society. It was a voluntary association of equal states that banded together and sacrificed part of their sovereignty for the common good. The idea of Europe as an open society continues to inspire me.

But since the financial crisis of 2008, the EU seems to have lost its way. It adopted a program of fiscal retrenchment, which led to the euro crisis and transformed the eurozone into a relationship between creditors and debtors. The creditors set the conditions that the debtors had to meet, yet could not meet. This created a relationship that was neither voluntary nor equal – the very opposite of the credo on which the EU was based.

As some will remember, Soros Fund Management – the family office that manages Soros’s money, which he has mostly dedicated to his “Open Society” network of NGOs – closed most of its long-EM positions after President Trump defeated Hillary Clinton. Of course, where Soros sees danger, others see opportunity. For example, Mark Mobius “un-retired” last month to open a fund that he hopes will take advantage of opportunities amid the EM carnage, as analysts continue to see EM as the area that’s most vulnerable to a re-pricing in USD.

* * *

Read the speech in full below:

The European Union is mired in an existential crisis. For the past decade, everything that could go wrong has gone wrong. How did a political project that has underpinned Europe’s postwar peace and prosperity arrive at this point?

In my youth, a small band of visionaries led by Jean Monnet transformed the European Coal and Steel Community first into the European Common Market and then the EU. People of my generation were enthusiastic supporters of the process.

I personally regarded the EU as the embodiment of the idea of the open society. It was a voluntary association of equal states that banded together and sacrificed part of their sovereignty for the common good. The idea of Europe as an open society continues to inspire me.

But since the financial crisis of 2008, the EU seems to have lost its way. It adopted a program of fiscal retrenchment, which led to the euro crisis and transformed the eurozone into a relationship between creditors and debtors. The creditors set the conditions that the debtors had to meet, yet could not meet. This created a relationship that was neither voluntary nor equal – the very opposite of the credo on which the EU was based.

As a result, many young people today regard the EU as an enemy that has deprived them of jobs and a secure and promising future. Populist politicians exploited the resentments and formed anti-European parties and movements.

Then came the refugee influx of 2015. At first, most people sympathized with the plight of refugees fleeing political repression or civil war, but they didn’t want their everyday lives disrupted by a breakdown in social services. And soon they became disillusioned by the failure of the authorities to cope with the crisis.

When that happened in Germany, the far-right Alternative für Deutschland (AfD) rapidly gained strength, making it the country’s largest opposition party. Italy has suffered from a similar experience recently, and the political repercussions have been even more disastrous: the anti-European Five Star Movement and League parties almost took over the government. The situation has been deteriorating ever since. Italy now faces elections in the midst of political chaos.

Indeed, the whole of Europe has been disrupted by the refugee crisis. Unscrupulous leaders have exploited it even in countries that have accepted hardly any refugees. In Hungary, Prime Minister Viktor Orbán based his reelection campaign on falsely accusing me of planning to flood Europe, Hungary included, with Muslim refugees.

Orbán is now posing as the defender of his version of a Christian Europe, one that challenges the values on which the EU was based. He is trying to take over the leadership of the Christian Democratic parties which form the majority in the European Parliament.

The United States, for its part, has exacerbated the EU’s problems. By unilaterally withdrawing from the 2015 Iran nuclear deal, President Donald Trump has effectively destroyed the transatlantic alliance. This has put additional pressure on an already beleaguered Europe. It is no longer a figure of speech to say that Europe is in existential danger; it is the harsh reality.

What Can Be Done?

The EU faces three pressing problems: the refugee crisis; the austerity policy that has hindered Europe’s economic development; and territorial disintegration, as exemplified by Brexit. Bringing the refugee crisis under control may be the best place to start.

I have always advocated that the allocation of refugees within Europe should be entirely voluntary. Member states should not be forced to accept refugees they don’t want, and refugees should not be forced to settle in countries where they don’t want to go.

This fundamental principle ought to guide Europe’s migration policy. Europe must also urgently reform the Dublin Regulation, which has put an unfair burden on Italy and other Mediterranean countries, with disastrous political consequences.

The EU must protect its external borders but keep them open for lawful migrants. Member states, in turn, must not close their internal borders. The idea of a “fortress Europe” closed to political refugees and economic migrants not only violates European and international law; it is also totally unrealistic.

Europe wants to extend a helping hand toward Africa and other parts of the developing world by offering substantial assistance to democratically inclined regimes. This is the right approach, as it would enable these governments to provide education and employment to their citizens, who would then be less likely to make the often dangerous journey to Europe.

By strengthening democratic regimes in the developing world, such an EU-led “Marshall Plan for Africa” would also help to reduce the number of political refugees. European countries could then accept migrants from these and other countries to meet their economic needs through an orderly process. In this way, migration would be voluntary both on the part of the migrants and the receiving states.

Present-day reality, however, falls substantially short of this ideal. First, and most importantly, the EU still lacks a unified migration policy. Each member state has its own policy, which is often at odds with the interests of other states.

Second, the main objective of most European countries is not to foster democratic development in Africa and elsewhere, but to stem the flow of migrants. This diverts a large part of the available funds to dirty deals with dictators, bribing them to prevent migrants from passing through their territory or to use repressive methods to prevent their citizens from leaving. In the long run, this will generate more political refugees.

Third, there is a woeful shortage of financial resources. A meaningful Marshall Plan for Africa would require at least €30 billion ($35.4 billion) annually for a number of years. EU member states could contribute only a small fraction of this amount. So, where could the money come from?

It is important to recognize that the refugee crisis is a European problem requiring a European solution. The EU has a high credit rating, and its borrowing capacity is largely unused. When should that capacity be put to use if not in an existential crisis? Historically, national debt always grew in times of war. Admittedly, adding to the national debt runs counter to the prevailing orthodoxy that advocates austerity; but austerity is itself a contributing factor to the crisis in which Europe finds itself.

Until recently, it could have been argued that austerity is working: the European economy is slowly improving, and Europe must simply persevere. But, looking ahead, Europe now faces the collapse of the Iran nuclear deal and the destruction of the transatlantic alliance, which is bound to have a negative effect on its economy and cause other dislocations.

The strength of the dollar is already precipitating a flight from emerging-market currencies. We may be heading for another major financial crisis. The economic stimulus of a Marshall Plan for Africa and other parts of the developing world should kick in just at the right time. That is what has led me to put forward an out-of-the-box proposal for financing it.

Without going into the details, I want to point out that the proposal contains an ingenious device, a special-purpose vehicle, that would enable the EU to tap financial markets at a very advantageous rate without incurring a direct obligation for itself or for its member states; it also offers considerable accounting benefits. Moreover, although it is an innovative idea, it has already been used successfully in other contexts, namely general-revenue municipal bonds in the US and so-called surge funding to combat infectious diseases.

But my main point is that Europe needs to do something drastic in order to survive its existential crisis. Simply put, the EU needs to reinvent itself.

This initiative needs to be a genuinely grassroots effort. The transformation of the Coal and Steel Community into the European Union was a top-down initiative and it worked wonders. But times have changed. Ordinary people feel excluded and ignored. Now we need a collaborative effort that combines the top-down approach of the European institutions with the bottom-up initiatives that are necessary to engage the electorate.

Of the three pressing problems, I have addressed two. That leaves territorial disintegration, exemplified by Brexit. It is an immensely damaging process, harmful to both sides. But a lose-lose proposition could be converted into a win-win situation.

Divorce will be a long process, probably taking more than five years – a seeming eternity in politics, especially in revolutionary times like the present. Ultimately, it is up to the British people to decide what they want to do, but it would be better if they came to a decision sooner rather than later. That is the goal of an initiative called Best for Britain, which I support. This initiative fought for, and helped to win, a meaningful parliamentary vote on a measure that includes the option of not leaving before Brexit is finalized.

Britain would render Europe a great service by rescinding Brexit and not creating a hard-to-fill hole in the European budget. But its citizens must express support by a convincing margin in order to be taken seriously by Europe. That is Best for Britain’s aim in engaging the electorate.

The economic case for remaining an EU member is strong, but it has become clear only in the last few months, and it will take time to sink in. During that time, the EU needs to transform itself into an organization that countries like Britain would want to join, in order to strengthen the political case.

Such a Europe would differ from the current arrangements in two key respects. First, it would clearly distinguish between the EU and the eurozone. Second, it would recognize that the euro has many unsolved problems, which must not be allowed to destroy the European project.

The eurozone is governed by outdated treaties that assert that all EU member states are expected to adopt the euro if and when they qualify. This has created an absurd situation where countries like Sweden, Poland, and the Czech Republic, which have made it clear that they have no intention to join, are still described and treated as “pre-ins.”

The effect is not purely cosmetic. The existing framework has converted the EU into an organization in which the eurozone constitutes the inner core, with the other members relegated to an inferior position. There is a hidden assumption at work here, namely that, while various member states may be moving at different speeds, they are all heading to the same destination. This ignores the reality that a number of EU member countries have explicitly rejected the EU’s goal of “ever closer union.”

This goal should be abandoned. Instead of a multi-speed Europe, the goal should be a “multi-track Europe” that allows member states a wider variety of choices. This would have a far-reaching beneficial effect. Currently, attitudes toward cooperation are negative: member states want to reassert their sovereignty rather than surrender more of it. But if cooperation produced positive results, sentiment might improve, and some objectives, like defense, that are currently best pursued by coalitions of the willing might attract universal participation.

Harsh reality may force member states to set aside their national interests in the interest of preserving the EU. That is what French President Emmanuel Macron urged in the speech he delivered in Aachen when he received the Charlemagne Prize, and his proposal was cautiously endorsed by German Chancellor Angela Merkel, who is painfully aware of the opposition she faces at home. If Macron and Merkel succeeded, despite all the obstacles, they would follow in the footsteps of Monnet and his small band of visionaries. But that narrow group needs to be replaced by a large upsurge of bottom-up pro-European initiatives. I and my network of Open Society Foundations will do everything we can to help those initiatives.

Fortunately, Macron, at least, is well aware of the need to broaden popular support for and participation in European reform, as his proposal for “Citizens’ Consultations” makes clear. The Trento Economic Festival, a large gathering organized by civil-society groups at a time when Italy did not have a government, will meet from May 31 to June 3. I hope it will be successful and set a good example for similar civil-society initiatives to emulate.

(BI) Bill Gates thinks a coming disease could kill 30 million people within 6 months — and says we should prepare for it as we do for war


bill gatesJack Taylor/Getty Images)

  • The next deadly disease that will cause a global pandemic is coming, Bill Gates said on Friday at a discussion of epidemics.
  • We’re not ready.
  • An illness like the pandemic 1918 influenza could kill 30 million people within six months, Gates said, adding that the next disease might not even be a flu, but something we’ve never seen.
  • The world should prepare as it does for war, Gates said.

If there’s one thing that we know from history, it’s that a deadly new disease will arise and spread around the globe.

That could happen easily within the next decade. And as Bill Gates told listeners on Friday at a discussion about epidemics hosted by the Massachusetts Medical Society and the New England Journal of Medicine, we’re not ready.

Gates acknowledged that he’s usually the optimist in the room, reminding people that we’re lifting children out of poverty around the globe and getting better at eliminating diseases like polio and malaria.

But “there’s one area though where the world isn’t making much progress,” Gates said, “and that’s pandemic preparedness.”

The likelihood that such a disease will appear continues to rise. New pathogens emerge all the time as the world population increases and humanity encroaches on wild environments. It’s becoming easier and easier for individual people or small groups to create weaponized diseasesthat could spread like wildfire around the globe.

According to Gates, a small non-state actor could build an even deadlier form of smallpox in a lab.

And in our interconnected world, people are always hopping on planes, crossing from cities on one continent to those on another in a matter of hours.

Gates presented a simulation by the Institute for Disease Modeling that found that a new flu like the one that killed 50 million people in the 1918 pandemic would now most likely kill 30 million people within six months.

And the disease that next takes us by surprise is likely to be one we see for the first time at the start of an outbreak, like what happened recently with SARS and MERS viruses.

If you were to tell the world’s governments that weapons that could kill 30 million people were under construction right now, there’d be a sense of urgency about preparing for the threat, Gates said.

“In the case of biological threats, that sense of urgency is lacking,” he said. “The world needs to prepare for pandemics in the same serious way it prepares for war.”

pandemic disease ebolaJohn Moore/Getty

Stopping the next pandemic

The one time the military tried a sort of simulated war game against a smallpox pandemic, the final score was “smallpox one, humanity zero,” Gates said.

But he reiterated that he’s an optimist, saying he thinks we could better prepare for the next viral or bacterial threat.

In some ways, we’re better prepared now than we were for previous pandemics. We have antiviral drugs that can in many cases do at least something to improve survival rates. We have antibiotics that can treat secondary infections like pneumonia associated with the flu.

We’re also getting closer to a universal flu vaccine; Gates announced on Friday that the Bill and Melinda Gates Foundation would offer $12 million in grants to encourage its development.

And we’re getting better at rapid diagnosis too — which is essential, as the first step toward fighting a new disease is quarantine. Just this week, a new research paper in the journal Science touted the development of a way to use the gene-editing technology Crispr to rapidly detect diseases and identify them using the same sort of paper strip used in a home pregnancy test.

But we’re not yet good enough at rapidly identifying the threat from a disease and coordinating a response, as the global reaction to the latest Ebola epidemic showed.

There needs to be better communication between militaries and governments to help coordinate responses, Gates said. And he thinks governments need ways to quickly enlist the help of the private sector when it comes to developing technology and tools to fight an emerging deadly disease.

Melinda Gates recently said that the threat of a global pandemic, whether it emerges naturally or is engineered, was perhaps the biggest risk to humanity.

“Think of the number of people who leave New York City every day and go all over the world — we’re an interconnected world,” she said.

Those connections make us all vulnerable.

(Time) ‘World Peace!’ President Trump Reveals Kim Jong Un Meeting Will Take Place in Singapore on June 12

(Time) President Donald Trump revealed the date and location of his upcoming meeting with North Korean leader Kim Jong Un, announcing Thursday that they will meet in Singapore on June 12.

In typical fashion, Trump first revealed the news on Twitter. “The highly anticipated meeting between Kim Jong Un and myself will take place in Singapore on June 12th,” he tweeted Thursday morning. “We will both try to make it a very special moment for World Peace!”

The details of the sit-down came two days after Secretary of State Mike Pompeo traveled to North Korea to prepare for the meeting, which Trump noted on Tuesday as he withdrew the U.S. from the Iran nuclear deal. “The United States no longer makes empty threats. When I make promises, I keep them,” Trump said in his speech at the White House that day. “In fact, at this very moment, Secretary Pompeo is on his way to North Korea in preparation for my upcoming meeting with Kim Jong Un. Plans are being made. Relationships are building.”

Some foreign policy experts worry that backing out of the Iran deal will make it harder for the Trump Administration to convince North Korea to enter into a deal with the U.S. But as TIME reported earlier this week, Trump and his aides think the decision will show North Korea that the United States won’t accept any deal that would allow Kim to restart a nuclear program.

(Popular Science) Cryptocurrency millionaires are pushing up prices on some art and collectibles

(Popular ScienceThe rise of Bitcoin and its ilk have seriously shifted some collectible prices.

Vintage MTG cards


The numbers are prices in dollars. These cards get expensive.

Stan Horaczek

Only 5 percent of people own Bitcoin, the most popular cryptocurrency, but that doesn’t mean it’s not affecting the rest of us. It’s increasingly obvious that the digital currencies are affecting very real world things, including the price of collectibles like art, cars, and trading cards.

Rudy the Magic Guy, a YouTube personality known for his insights into the collectible card game Magic: The Gathering, says that he’s seen the price of the most valued Magic cards jump as a result of cryptocurrency. The game, which is celebrating its 25th anniversary this year, compels players to accumulate cards to build decks they use to compete against other players. The cards are primarily sold in randomized packs or as single cards on the secondary market.

Between 1993 and 1997, Magic released a reserve set of cards that would never be reproduced, creating an instant collectible in the process. “In the last two years specifically, these cards have gone up substantially,” Rudy, who doesn’t use his last name, says. “There were a lot of cards that were $30 cards [a few] years ago, and now they’re $300 to $400.”

Rudy says that customers have told him about converting money made through gains in Bitcoin and other cryptocurrencies into U.S. dollars and using those dollars to buy Magic cards. “There are examples of individuals who made millions in the crypto and they’d chopped off hundreds of thousands and put into Magic cards and graded cards,” he says. Some of the buyers are motivated by nostalgia and a love of the game, Rudy says, but most appear motivated by the perceived stability of the card’s value.

Crypto Rose


The Crypto Rose fetched a million dollars from a group of investors.

Kevin Abosch

“More people are [realizing they aren’t limited to] stocks, bonds, and real estate. I can do collectibles, I can do crypto,” he says. For many, limited edition Magic cards will appreciate faster than a traditional investment—and won’t collapse like cryptocurrencies sometimes do. (Bitcoin’s value rose more than 1,300 percent over the course of 2017, but was punctuated by several striking downturns.)

Of course, Magic cards aren’t the only collectible changing in the face of cryptocurrency’s ascendance. On Valentine’s Day, a piece of “cryptoart” sold for the equivalent of $1 million. A rendering of a rose (or a “rose token”), which is perhaps the highest price ever paid for a piece of so-called virtual art. Experts predict the art industry will continue to change in response to digital currencies, with more virtual art being created and sold, and physical art being influenced by cryptocurrency and its status in our culture.

The car market is also feeling the crypto crunch. Established in 2015, Bitcar encourages customers to buy a small stake in a luxury vehicle. Options include Lamborghinis, Bugattis, and Ferraris. Bitcar buyers never actually drive—or necessarily even see—the car they invest in. Rather, the cars are stored and resold 5 to 15 years later. At that point, the initial Bitcar investors get a kickback, assuming the value of the car increased.

The crypto trend hasn’t affected every segment of the collectibles market, however. Douglas Mudd is a representative of the American Numismatic Association. The leading organization for coin collectors in the United States, the association deals not in Bitcoin, but the real, physical coins that have been passed around by humans for millennia. Mudd says that, while he can’t be certain, he doesn’t think crypto has significantly altered the market for coins.

He says that three things make the coin market different from other collectibles: the inherent value of physical currency and the sheer size of the coin collecting market. “Coins are valuable because they have gold and silver—intrinsic value—that is not there in comics or cards or what have you,” Mudd says. Magic is a fairly small market with a limited number of cards that dealers and collectors can readily track, coin collecting is much bigger, which obscures root causes. “Coin collectibles, that market, it’s enormous—hundreds of billions of dollars or more are traded just in the United States,” Mudd says. “Even if people started wholesale converting their crypto coins into collectible coins, it wouldn’t be detectable.”

Temperament might also be at play when it comes to which collectibles markets cryptocurrency can change. “For some reason the same type of personality traits seem to be connected between the investor in crypto and Magic,” Rudy says. “Magicis a very numerical strategy, with a lot of numbers, odds, and statistics.” Similarly, concerns about the trustworthiness of the U.S. government and the stability of traditional currency may also overlap between Magic players and crypto investors. When when describing himself and other Magic: The Gathering players, Rudy says, “I don’t have any [crypto]currency. I don’t even believe in the U.S. dollar. I believe in cards.”

Statistics and politics are not typically the motivations for coin collecting, by contrast. “They believe in tangible things,” Mudd says of the coin community. “So going into intangibles that you can’t collect, that loses some interest right there.” What’s more, Mudd adds, “coin collectors tend to be pretty conservative.” Magicplayers are products of 90s nostalgia, but coin collectors are older—the average age of an American Numismatic Association member is nearly 60—and they behave accordingly.

Of course, the individual fluctuations in collectibles markets will always remain most important to the collectors themselves and of little notice to those outside these bubbles. But it’s increasingly clear that crypto millionaires and even billionaires can have a big effect on conventional markets when they move their digital currency into paper dollars. If all goes well, it may be just a matter of time until Bitcoin finallycomes for Beanie Babies.

+++ (BBG) Global Stock Slump Continues; China Gets Hit Hard: Markets Wrap

(Bloomberg) — The sell-off in global stocks that briefly
looked to have ended mid-week has come back, tipping markets
from the U.S. to Asia into declines exceeding 10 percent from
their January highs. China, where retail investors dominate, got
hit particularly hard Friday.
Equity traders have yet to get comfortable with a jump up
in benchmark U.S. 10-year yields to their highest in four years,
and worries over the unwinding of bets against volatility in
stocks continue to cast a shadow over markets.
Japan’s equity benchmarks were down over 3 percent Friday,
though pared the worst of its losses. South Korea’s index fell
almost 2 percent and Hong Kong’s slid almost 4 percent. Onshore
China gauges at one point exceeded 5 percent losses on the day.
U.S. futures were higher, after fluctuating between gains and
losses, and even as the U.S. government entered a partial
shutdown. Elsewhere, West Texas Intermediate oil fell toward $60
a barrel. China set the yuan lower Friday after it weakend the
most since 2015 yesterday.
In stocks, the negative superlatives have piled up quickly:
the S&P 500 has erased its gain for the year, closed at a two-
month low and is on track for its worst week since 2011. The Dow
plunged more than 1,000 points for the second time in four days.
The MSCI Asia Pacific Index is set for the worst week since at
least February 2016.
Pressure on U.S. stocks again came from the Treasury
market, where another weak auction put gave bond bears
ammunition, sending the 10-year yield as high as 2.88 percent.
Equity investors took the signal to mean interest rates will
push higher, denting earnings and consumer-spending power.
For a market that hadn’t fallen 3 percent from any high in
more than a year, the week’s action was enough to rattle even
the biggest equity bulls. Accustomed to buying the dip, that
wisdom is now in question when more selling by speculators may
be imminent. Over $5 trillion has been wiped from global stock
markets since Jan. 26, according to S&P Dow Jones Indices.
“There’s some big-money players that have really leveraged
to the low rates forever, and they have to unwind those trades,”
said Doug Cote, chief market strategist at Voya Investment
Management. “They could be in full panic mode right now.”
As the equity selling intensified, haven assets grew
attractive. Gold steadied, the yen held gains and even
Treasuries pared the worst of their declines.
Volatility spread across assets. The Cboe Volatility Index
was more than double its level a week ago. The VIX’s bond-market
cousin reached its highest since April. A measure of currency
volatility spiked to levels last seen almost a year ago, with a
plunge in the yuan and a rise in the pound adding to turbulence.
European equities weren’t spared, with the Euro Stoxx 50
volatility gauge spiking toward the highest since June 2016 —
the month of the Brexit vote.
Terminal users can read more in our markets blog.
Here are some events scheduled for the remainder of this
* The Bank of Russia is set to hold a rates decision Friday,
with most economists forecasting a cut.

And these are the main moves in markets:


* The MSCI Asia Pacific Index dropped 2.1 percent as of 2:43
p.m. Tokyo time.
* Topix index fell 2.2 percent.
* Hong Kong’s Hang Seng Index tumbled 3.5 percent.
* Kospi index fell 1.8 percent.
* Australia’s S&P/ASX 200 Index fell 0.9 percent.
* Futures on the S&P 500 Index rose 0.4 percent.


* The Bloomberg Dollar Spot Index dipped 0.1 percent.
* The Japanese yen fell 0.2 percent to 108.96 per dollar.
* The euro increased 0.1 percent to $1.2261.


* The yield on 10-year Treasuries rose one basis point to 2.83
* Japan’s 10-year yield fell one basis point to 0.072 percent.


* West Texas Intermediate crude fell 1 percent to $60.53 a
* Gold fell less than 0.05 percent to $1,318.34 an ounce.
* LME copper fell 0.3 percent to $6,826.00 per metric ton.
Terminal users can read more on this week’s market turmoil
in these Bloomberg stories:
* Map to the Underworld: $2 Trillion of Volatility Trades Here
* How Does the World End? Stock Markets After a Psychological
* Good Is Bad, Bad Is Good and Trump Is Miffed at Stock Traders
* End of a Bull Market, or Nowhere Near? Making the Case for
* Credit Suisse Fund Liquidated, ETFs Halted as Short-Vol Bets

+++ (BBG) Europe’s Core Leaders Tell Davos Why They Are Different to Trump

(BBG) Davos may be all about Donald Trump’s America First speech on Friday, but Europe’s key figures reminded World Economic Forum delegates there is another way.

The leaders of Germany, France and Italy used separate appearances in the Swiss resort on Wednesday to beat the drum for free trade, globalization and more joint policy making in Europe.

“When we see that things aren’t equitable, we look for multilateral solutions rather than unilateral ones that simply promote isolation and protectionism,” said Chancellor Angela Merkel.

On a day when discussion was dominated by politics, Merkel was joined by French President Emmanuel Macron and Italian Prime Minister Paolo Gentiloni, who together represent continental Europe’s three biggest economies. Each rallied behind European ideals and outlined the reasons they oppose the U.S. president’s agenda.

Gentiloni said that Trump’s protectionist push threatens global growth, and urged Europe to fill any hole left by American businesses. After Trump slapped tariffs on solar panels and washing machines, Gentiloni said in a Bloomberg Television interview there is an opportunity for “the Italians, the Germans, the French and the Europeans as a whole to play a role.” Europe, he added, “is ready to fill this gap.”

All leaders are allowed to protect their own workers, the Italian premier said. “But there is a limit and the limit is defending our free trade, defending the model which has brought us to this kind of growth,” he said.

The leaders all condemned political parties in Europe that exploit public fears over the kind of disruptive change that costs jobs.

Populist Surge

Each has good reason to deplore populism: Macron’s National Front opponent, Marine Le Pen, took a third of the vote in last year’s presidential election; Merkel is struggling to form a government in part because the far right’s surge has upset coalition building; and Gentiloni is squeezed between the populist Five Star Movement and a center-right coalition ahead of Italian elections on March 4.

But they all acknowledged the need to address the root concerns that had fed populism, including the wave of migration into Europe and an inability to reduce inequality.

“That’s our challenge,” Macron said in an hour-long speech delivered in English and French. There are “a lot of fears, lack of understanding about this globalization” that have prompted voters to start questioning their leaders, he said.

Macron told delegates that it was their task to help rein in the excesses of global capitalism and called on executives and officials to avoid a “race to the bottom” on taxes and trade standards. Instead, he urged them to focus on the common good, social cohesion, health, education, climate and the fight against inequalities.

Merkel cited the lessons of 20th-century economic conflicts and war to make the case that nationalism and protectionism aren’t the answer.

“We have to advocate for our multilateral approach,” she said. “You need to have the patience to find multilateral solutions and not slip into the apparently easier solution of pursuing national interests. Once you have a national response, at some point you lose the strand of dialogue.”