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Markets Pricing In A Viral All Clear

Markets Pricing In A Viral All Clear

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Financial markets disconnection with the real world accelerated overnight, with both equities and energy markets recording substantial gains as coronavirus lockdowns are eased across the globe. Life as we knew it, will not return to anything like normal anytime soon, even sans lockdowns, but facing down herd-like FOMO momentum usually leaves one trampled on the ground. Joining in or stepping aside seems to be safer strategies these days than “deep value investing.”

 

To be fair, some heavyweight names are saying the worst is over. Morgan Stanley and Goldman Sachs both said as much overnight. The Federal Reserve Vice-Chairman Richard Clarida counterposed that though, by saying that the US economy will need government support for some time yet. The welcome stating of the obvious poured a dose of reality on frothy equity markets, although they still finished comfortably in the green. The US government itself could still be a problem on this front. With further fiscal packages seemingly being dragged into a partisan mire. How quickly have we forgotten the increased China tensions? Nary a mention today of a trade war story that filled the headlines in the business press yesterday. Such is the desperation for a return to even partial normalcy for the world, and I can’t argue with that.

 

Someone who is arguing is the German Constitutional Court. Overnight it ruled that parts of the ECB quantitative easing programmes were illegal under German Law. It has overridden an EU Court of Justice ruling previously that they were legal, banned the Bundesbank from participating in any more bond-buying programmes for now, and given the ECB three months to sort the mess out. The ruling sent Euro lower versus the Dollar and rightly so. EUR/USD fell 0.65% to 1.0840.

 

The more profound question though is who is in charge in Europe? The German Courts of the European ones? The former opens up a continent-sized can of worms. Readers will know how underwhelmed I am with the European project in the absence of a monetary and fiscal union. And as a result, its recovery prospects, both since the GFC and now COVID-19. This adds another huge black mark to the debacle.

 

Both China and South Korea return from holiday today, although Japan remains on vacation until tomorrow. Both markets will have some bullish catchup to complete, and Asia, as a whole, should trade positively as the coronavirus reopening trade continues to gain momentum.

 

The data calendar is light in Asia today, with both Singapore and Hong Kong’s PMI today lower, but not surprisingly so. German Factory Orders this afternoon ae expected to drop by 10% with Europe-wide Retail Sales data likely to make grim reading. US ADP Employment data for March is forecast to drop by 20 million jobs. However, the street appears to have built up some herd immunity to bad news in recent days, accepting its inevitability but preferring to concentrate on the potentially better days ahead. Who I am to argue with this? The nightmarish US Initial Claims and Non-Farm Payroll data due this week, Trump trade wars, or the German Constitutional Court trying to seize control of Europe, may not be received as negatively as they usually should and would be.

 

Positive Wall Street session greenlights equity gains in Asia.

 

Wall Street continues embracing the peak virus trade overnight, with only the Fed’s Clarida dampening an otherwise frothy session late in the day. Equity markets were in no mood to listen to a Fed governor being the voice of reason though. The S&P 500 climbing 0.90%, the Nasdaq rising 1.10% and the Dow Jones rising 0.60%.

 

Asia looks set to continue in the same vein with markets concentrating on the winding down of coronavirus lockdowns and a resurgence in economic activity to follow. One exception is likely to be Chinese Mainland markets that return from Labour Day holidays today. The trade rhetoric and virus coverup accusations from Washington DC will weigh on sentiment this morning.

 

South Korea has returned from holiday and has surged higher by 1.10%. Singapore has risen 0.35% although Australia has retreated by 0.70% this morning. Still, a rebound in retail sales by 8.50% just released, should limit losses. The rest of Asia though, as it comes online set to emulate Wall Street and head higher over the morning.

 

US Dollar strength lingers.

 

The US Dollar continues to outperform as forex markets diverge somewhat from equity and energy markets. The EUR/USD falling 70 points to 1.0840 lifted the dollar index, which climbed 0.30% to 99.27. USD/JPY has also fallen from 107.00 to 106.35 this morning, its lowest level in one month. The persistent buying of haven currency US Dollars and Japanese Yen this week, suggests that currency markets are not yet wholeheartedly embracing the peak virus story.

 

FX traders are also likely to be more nervous about renewed US-China trade hostilities, especially with China only returning to work today. Worries that China may tolerate a weaker Yuan to punish the US is likely holding up a more wholesale rotation out of haven positioning.

 

Oil continues its breath-taking rally.

 

The perils of standing in front of short-term momentum are nowhere more apparent then oil markets at the moment, as the colossal rally continued overnight. Investors are piling into black gold as expectations that the peak drop in demand has occurred, as coronavirus lockdowns are unwound.

 

Brent crude surged 14.50% higher overnight to $31.50 a barrel and touched $32.00 a barrel this morning before easing slightly. Brent crude has resistance at these levels in the form of the 50-day moving average at $32.00 a barrel. Major resistance lies at $36.00 a barrel. Given that Brent has rallied from $20.00 a barrel only a week, $36.00 should prove an insurmountable challenge, even in this wildly optimistic environment.

 

WTI’s overnight rally was even more impressive, albeit from a lower base. WTI futures leapt by 20.50% to $ 24.60 a barrel in overnight trading, although WTI is unchanged this morning. WTI’s next meaningful resistance lies at $29.00 a barrel although, like Brent, that may be a bridge too far.

 

The return of China from holiday is capping gains in oil as energy markets reluctantly face up to the reality of deteriorating relations between China and the US. While the rest of the world despairs of the biggest kids in the playground ever being able to share the toys, worries that China could retaliate against the US virus and trade accusations are real. If anything can undermine a peak virus rally, a US-China trade war would do the job nicely.

 

Nothing has changed for gold traders.

 

Gold continues to experience impressive $30 ranges intra-day, with equally unimpressive almost unchanged close concluding the day. Such was the case overnight, with gold trading between $1680.00 and $1710.00 an ounce, only to close unchanged from the previous day at $1700.00 an ounce.

 

The price action suggests that gold remains the domain of intra-day momentum traders and not longer-term fundamental ones. The latter appears to be content residing on the side-lines until either $1650.00 or $1750.00 an ounce, are convincingly broken.

 

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Government

Menendez indictment looks bad, but there are defenses he can make

The indictment of Sen. Bob Menendez is full of lurid details – hundreds of thousands of dollars in cash stuffed into clothes among them. Will they tank…

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1 hour ago

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September 24, 2023

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Senate Foreign Relations Committee Chairman, Sen. Bob Menendez, D-N.J., right, and his wife Nadine Arslanian. AP Photo/Susan Walsh, File

Reactions came quickly to the federal indictment on Sept. 22, 2023 of New Jersey’s senior U.S. senator, Democrat Bob Menendez. New Jersey Gov. Phil Murphy joined other state Democrats in urging Menendez to resign, saying “The alleged facts are so serious that they compromise the ability of Senator Menendez to effectively represent the people of our state.”

The indictment charged Menendez, “his wife NADINE MENENDEZ, a/k/a ‘Nadine Arslanian,’ and three New Jersey businessmen, WAEL HANA, a/k/a ‘Will Hana,’ JOSE URIBE, and FRED DAIBES, with participating in a years-long bribery scheme…in exchange for MENENDEZ’s agreement to use his official position to protect and enrich them and to benefit the Government of Egypt.” Menendez said he believed the case would be “successfully resolved once all of the facts are presented,” but he stepped down temporarily as the chairman of the Senate’s influential Committee on Foreign Relations.

The Conversation’s senior politics and democracy editor, Naomi Schalit, interviewed longtime Washington, D.C. lawyer and Penn State Dickinson Law professor Stanley M. Brand, who has served as general counsel for the House of Representatives and is a prominent white-collar defense attorney, and asked him to explain the indictment – and the outlook for Menendez both legally and politically.

What did you think when you first read this indictment?

As an old seafaring pal once told me, “even a thin pancake has two sides.”

Reading the criminal indictment in a case for the first time often produces a startled reaction to the government’s case. But as my over 40 years of experience defending public corruption cases and teaching criminal law has taught me, there are usually issues presented by an indictment that can be challenged by the defense.

In addition, as judges routinely instruct juries in these cases, the indictment is not evidence and the jury may not rely on it to draw any conclusions.

A man in a suit pointing at a poster board with various photos on it.
Damian Williams, U.S. Attorney for the Southern District of New York, speaks during a press conference on Sept. 22, 2023 after announcing the Menendez indictment. Alexi J. Rosenfeld/Getty Images

The average reader will look at the indictment and say “These guys are toast.” But are there ways Menendez can defend himself?

There are a number of complex issues presented by these charges that could be argued by the defense in court.

First, while the indictment charges a conspiracy to commit bribery, it does not charge the substantive crime of bribery itself. This may suggest that the government lacks what it believes is direct evidence of a quid pro quo – “this for that” – between Menendez and the alleged bribers.

There is evidence of conversations and texts that coyly and perhaps purposely avoid explicit acknowledgment of a corrupt agreement, for instance, “On or about January 24, 2022, DAIBES’s Driver exchanged two brief calls with NADINE MENENDEZ. NADINE MENENDEZ then texted DAIBES, writing, ‘Thank you. Christmas in January.’”

The government will argue that this reflects acknowledgment of a connection between official action and delivery of cash to Sen. Menendez, even though it is a less than express statement of the connection.

Speaking in this kind of code may not fully absolve the defendants, but the government must prove the defendants’ intent to carry out a corrupt agreement beyond a reasonable doubt – and juries sometimes want to see more than innuendo before convicting.

The government has also charged a crime called “honest services fraud” – essentially, a crime involving a public official putting their own financial interest above the public interest in their otherwise honest and faithful performance of their duties.

The alleged failure of Sen. Menendez to list the gifts, as required, on his Senate financial disclosure forms will be cited by prosecutors as evidence of “consciousness of guilt” – an attempt to conceal the transactions.

However, under a recent Supreme Court case involving former Gov. Bob McDonnell of Virginia for similar crimes, the definition of “official acts” under the bribery statute has been narrowly defined to mean only formal decisions or proceedings. That definition does not include less-formal actions like those performed by Sen. Menendez, such as meetings with Egyptian military officials.

The Supreme Court rejected an interpretation of official acts that included arranging meetings with state officials and hosting events at the Governor’s mansion or promoting a private businessman’s products at such events.

When it comes time for the judge to instruct the jury at the end of the trial, Sen. Menendez may well be able to argue that much of what he did not constitute “official acts” and therefore are not illegal under the bribery statute.

This case involves alleged favors done for a foreign country in exchange for money. Does that change this case from simple bribery to something more serious?

The issue of foreign military sales to Egypt may also present a constitutional obstacle to the government.

The indictment specifically cites Sen. Menendez’s role as chairman of the Senate Foreign Relations Committee and actions he took in that role in releasing holds on certain military sales to Egypt and letters to his colleagues on that issue. The Constitution’s Speech or Debate Clause protects members from liability or questioning when undertaking actions within the “legitimate legislative sphere” – which undoubtedly includes these functions.

While this will not likely be a defense to all the allegations, it could require paring the allegations related to this conduct. That would whittle away at a pillar of the government’s attempt to show Sen. Mendendez had committed abuse of office.

In fact, when the government has charged members of Congress with various forms of corruption, courts have rejected any reference to their membership on congressional committees as evidence against them.

Three men in suits, standing in front of a fire engine.
NJ Gov. Phil Murphy, left, seen here in 2018 with fellow Democrats Sens. Robert Menendez and Cory Booker, has called on Menendez to resign. AP Photo/Wayne Parry

How likely is Sen. Mendendez’ ouster from the Senate?

Generally, neither the House nor Senate will move to expel an indicted member before conviction.

There have been rare exceptions, such as when Sen. Harrison “Pete” Williams was indicted in the FBI ABSCAM sting operation from the late 1970s and early 1980s against members of Congress. He resigned in 1982 shortly before an expulsion vote. With current Democratic control of the Senate by a margin of just one seat, Sen. Menendez’ ouster seems unlikely even though the Democratic governor of New Jersey would assuredly appoint a Democrat to fill the vacancy.

“In the history of the United States Congress, it is doubtful there has ever been a corruption allegation of this depth and seriousness,” former New Jersey Sen. Robert Torricelli said. True?

That seems hyperbolic. The Menendez case is just the latest in a long line of corruption cases involving members of Congress.

In the ABSCAM case, seven members of the House and one Senator were all convicted in a bribery scheme. That scheme involved undercover FBI agents dressed up as wealthy Arabs, offering cash to Congressmembers in return for a variety of political favors.

In the Korean Influence Investigation in 1978 – when I served as House Counsel – the House and Department of Justice conducted an extensive investigation of influence peddling by Tongsun Park, a Korean national in which questionnaires were sent to every member of the House relating to acceptance of gifts from Park.

Going all the way back to 1872, there was the Credit Mobilier scandal that involved prominent members of the House and Vice President Schuyler Colfax in a scheme to reward these government officials with shares in the transcontinental railroad company in exchange for their support of funding for the project.

Stanley M. Brand does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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International

Von Der Leyen Speech Suggests Russia Dropped Nuke On Hiroshima 

Von Der Leyen Speech Suggests Russia Dropped Nuke On Hiroshima 

Von der Leyen just said what?…

This past Wednesday, President of the European…

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2 hours ago

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September 24, 2023

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Von Der Leyen Speech Suggests Russia Dropped Nuke On Hiroshima 

Von der Leyen just said what?...

This past Wednesday, President of the European Commission Ursula von der Leyen delivered a speech before the 2023 Atlantic Council Awards in New York, where she sounded the alarm over the specter of nuclear war centered on the Russia-Ukraine conflict. But while invoking remembrance of the some 78,000 civilians killed instantly by the atomic bomb dropped on Hiroshima at the end of WWII, she said her warning comes "especially at a time when Russia threatens to use nuclear weapons once again". She  actually framed the atomic atrocity in a way that made it sound like the Russians did it. Watch:

There was not one single acknowledgement in Von der Leyen's speech that it was in fact the United States which incinerated and maimed hundreds of thousands when it dropped no less that two atomic bombs on Japanese cities.

Here were her precise words, according to an Atlantic Council transcript...

You, dear Prime Minister, showed me the meaning of this proverb during the G7 summit in Japan last year. You brought us to your hometown of Hiroshima, the place where you have your roots and which has deeply shaped your life and leadership. Many of your relatives lost their life when the atomic bomb razed Hiroshima to the ground. You have grown up with the stories of the survivors. And you wanted us to listen to the same stories, to face the past, and learn something about the future.

It was a sobering start to the G7, and one that I will not forget, especially at a time when Russia threatens to use nuclear weapons once again. It is heinous. It is dangerous. And in the shadow of Hiroshima, it is unforgivable. 

The above video of that segment of the speech gives a better idea of the subtle way she closely associated in her rhetoric the words "once again" with the phrase "shadow of Hiroshima" while focusing on what Russia is doing, to make it sound like it was Moscow behind the past atrocities.

Via dpa

Russian media not only picked up on the woefully misleading comments, but the Kremlin issued a formal rebuke of Von der Leyen's speech as well:

In response to von der Leynen's remarks, Russian Foreign Ministry spokeswoman Maria Zakharova accused the European Commission president of making "no mention whatsoever of the US and its executioners who dropped the bombs on populated Japanese cities."

Zakharova responded on social media, arguing that von der Leyen's assertions on Moscow's supposed intentions to employ nuclear weapons "is despicable and dangerous" and "lies."

Some Russian embassies in various parts of the globe also highlighted the speech on social media, denouncing the "empire of lies" and those Western leaders issuing 'shameful' propaganda and historical revisionism.

Tyler Durden Sun, 09/24/2023 - 13:15

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International

Saudi Arabia Sentences Schoolgirl To 18 Years In Prison Over Tweets

Saudi Arabia Sentences Schoolgirl To 18 Years In Prison Over Tweets

Via Middle East Eye,

Saudi Arabia has sentenced a secondary schoolgirl…

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3 hours ago

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September 24, 2023

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Saudi Arabia Sentences Schoolgirl To 18 Years In Prison Over Tweets

Via Middle East Eye,

Saudi Arabia has sentenced a secondary schoolgirl to 18 years in jail and a travel ban for posting tweets in support of political prisoners, according to a rights group.

On Friday, ALQST rights group, which documents human rights abuses in Saudi Arabia, revealed that the Saudi Specialised Criminal Court handed out the sentence in August to 18-year-old Manal al-Gafiri, who was only 17 at the time of her arrest.

Via Reuters

The Saudi judiciary, under the de facto rule of Crown Prince Mohammed bin Salman, has issued several extreme prison sentences over cyber activism and the use of social media for criticising the government.

They include the recent death penalty against Mohammed al-Ghamdi, a retired teacher, for comments made on Twitter and YouTube, and the 34-year sentence of Leeds University doctoral candidate Salma al-Shehab over tweets last year.

The crown prince confirmed Ghamdi's sentence during a wide-ranging interview with Fox News on Wednesday. He blamed it on "bad laws" that he cannot change. 

"We are not happy with that. We are ashamed of that. But [under] the jury system, you have to follow the laws, and I cannot tell a judge [to] do that and ignore the law, because... that's against the rule of law," he said.

Saudi human rights defenders and lawyers, however, disputed Mohammed bin Salman's allegations and said the crackdown on social media users is correlated with his ascent to power and the introduction of new judicial bodies that have since overseen a crackdown on his critics. 

"He is able, with one word or the stroke of a pen, in seconds, to change the laws if he wants," Taha al-Hajji, a Saudi lawyer and legal consultant with the European Saudi Organisation for Human Rights, told Middle East Eye this week.

According to Joey Shea, Saudi Arabia researcher at Human Rights Watch, Ghamdi was sentenced under a counterterrorism law passed in 2017, shortly after Mohammed bin Salman became crown prince. The law has been criticised for its broad definition of terrorism.

Similarly, two new bodies - the Presidency of State Security and the Public Prosecution Office - were established by royal decrees in the same year.

Rights groups have said that the 2017 overhaul of the kingdom's security apparatus has significantly enabled the repression of Saudi opposition voices, including those of women rights defenders and opposition activists. 

"These violations are new under MBS, and it's ridiculous that he is blaming this on the prosecution when he and senior Saudi authorities wield so much power over the prosecution services and the political apparatus more broadly," Shea said, using a common term for the prince.

Tyler Durden Sun, 09/24/2023 - 11:30

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