Thursday, May 5, 2016

Thursday, May 5, Night Wall Street Roundup: Wall St. Flat Ahead Of April Jobs Report; Retailers Fall

By Caroline Valetkevitch
May 5, 2016

U.S. stocks gave up early gains to end flat on Thursday as consumer discretionary shares fell and investors showed caution ahead of the April jobs report.

Shares of Tesla fell 5 percent to $211.53 after analysts expressed doubts about the electric carmaker's ability to deliver vehicles ahead of schedule.

Retailers and other discretionary shares declined, with L Brands dropping 12 percent to $70.54 after posting lower-than-expected monthly comparable sales.

Data on Thursday showed the number of Americans filing for unemployment benefits rose more than expected last week, posting the biggest jump in more than a year.

Investors were anxiously awaiting Friday's U.S. jobs data for April. Investors will comb through the report for any signs of how the labor market could influence the pace of rate hikes.

"Weekly jobless claims came in a bit higher than expected, and when you combine them with the ADP report from yesterday, that raises the possibility the national employment report tomorrow could be a bit on the softer side," said Michael Sheldon, chief investment officer at Northstar Wealth Partners in West Hartford, Connecticut.

The Dow Jones industrial average closed up 9.45 points, or 0.05 percent, to 17,660.71, the S&P 500 lost 0.49 points, or 0.02 percent, to 2,050.63 and the Nasdaq Composite dropped 8.55 points, or 0.18 percent, to 4,717.09.

It was the third session of losses for the S&P 500.

The ADP private sector employment report showed hiring in April fell to its lowest in three years.

A Reuters survey ahead of Friday's report showed nonfarm payrolls likely rose by 202,000 last month, after rising 215,000 in March, while the unemployment rate is forecast to hold at 5 percent.

Amazon's 1.8 percent fall to $659.09 weighed the most on the S&P 500 and Nasdaq.

Energy shares were among the day's advancers, but off their days highs, as oil prices gave up early gains. The S&P 500 energy index was up 0.7 percent.

About 7.3 billion shares changed hands on U.S. exchanges, compared with the 7.2 billion daily average for the past 20 trading days, according to Thomson Reuters data.

Declining issues outnumbered advancing ones on the NYSE by 1,559 to 1,415, for a 1.10-to-1 ratio on the downside; on the Nasdaq, 1,778 issues fell and 1,014 advanced for a 1.75-to-1 ratio favoring decliners.

The S&P 500 posted 21 new 52-week highs and 5 new lows; the Nasdaq recorded 34 new highs and 54 new lows.

Shift In Saudi Oil Thinking Deepens OPEC Split

By Dmitry Zhdannikov and Rania El Gamal
May 5, 2016

As OPEC officials gathered this week to formulate a long-term strategy, few in the room expected the discussions would end without a clash. But even the most jaded delegates got more than they had bargained with.

"OPEC is dead," declared one frustrated official, according to two sources who were present or briefed about the Vienna meeting.

This was far from the first time that OPEC's demise has been proclaimed in its 56-year history, and the oil exporters' group itself may yet enjoy a long life in the era of cheap crude.

Saudi Arabia, OPEC's most powerful member, still maintains that collective action by all producers is the best solution for an oil market that has dived since mid-2014.

But events at Monday's meeting of OPEC governors suggest that if Saudi Arabia gets its way, then one of the group's central strategies - of managing global oil prices by regulating supply - will indeed go to the grave.

In a major shift in thinking, Riyadh now believes that targeting prices has become pointless as the weak global market reflects structural changes rather than any temporary trend, according to sources familiar with its views.

OPEC is already split over how to respond to cheap oil. Last month tensions between Saudi Arabia and its arch-rival Iran ruined the first deal in 15 years to freeze crude output and help to lift global prices.

These resurfaced at the long-term strategy meeting of the OPEC governors, officials who report to their countries' oil ministers.

According to the sources, it was a delegate from a non-Gulf Arab country who pronounced OPEC dead in remarks directed at the Saudi representative as they argued over whether the group should keep targeting prices.

Iran, represented by its governor Hossein Kazempour Ardebili, has been arguing that this is precisely what OPEC was created for and hence "effective production management" should be one of its top long-term goals.

But Saudi governor Mohammed al-Madi said he believed the world has changed so much in the past few years that it has become a futile exercise to try to do so, sources say.

"OPEC should recognize the fact that the market has gone through a structural change, as is evident by the market becoming more competitive rather than monopolistic," al-Madi told his counterparts inside the meeting, according to sources familiar with the discussions.

"The market has evolved since the 2010-2014 period of high prices and the challenge for OPEC now, as well as for non-OPEC (producers), is to come to grips with recent market developments," al-Madi said, according to the sources.


For decades Saudi Arabia had a preferred oil price target and if it didn't like the prevailing market level, it would try to orchestrate a production cut or increase in OPEC. It would contribute the lion's share of the adjustment and forgive smaller and poorer members if they failed to comply with the group's agreement.

Back in 2008, the late King Abdullah named $75 a barrel as the kingdom's "fair" oil price, most likely after consultations with the long-serving oil minister Ali al-Naimi.

When the Saudis orchestrated the last output cut in 2008 - to support prices during the global economic crisis - oil jumped fairly quickly back above $100 from below $40. Later Riyadh again made known its price preference on a few occasions but in recent years it has effectively stopped sending any signals.

This follows the fundamental changes on oil markets. In the past five years, the development of unconventional oil production from U.S. shale deposits and other sources such as Canadian oil sands has made redundant the idea that crude is a scarce and finite resource. Russia, which is not an OPEC member, has also contributed to the ample global supply.

"No Free Riders"

Dispensing with price targets represents a massive change in Saudi thinking. This is now being driven largely by 31-year-old Deputy Crown Prince Mohammed bin Salman, who took over as the ultimate decision maker of the country's energy and economic policies last year.

When oil was viewed as scarce, the kingdom thought it had to maximize its long-term revenues even if that meant pumping fewer barrels and yielding market share to rival producers, according to several sources familiar with the Saudi thinking.

With the importance of oil declining, Riyadh has decided it is wiser to prioritize market share, the sources say. It believes it will be better off producing more at today's low prices than reducing output, only to sell the oil for even less in the future as global demand ebbs.

On top of this, Riyadh has pressing short-term needs including tackling a budget deficit which hit 367 billion riyals ($97.9 billion) or 15 percent of gross domestic product in 2015.

"The oil industry is, relatively speaking, not a growth industry any more," said one of the sources familiar with the Saudi views inside the OPEC governors' meeting.

In the past, low oil prices used to push global demand much higher but today's rising efficiency of motor vehicles, new technology and environmental policies have put a lid on growth.

Despite record low prices in the past year, demand is not expected to grow by more than 1 million barrels per day in 2016, just one percent of global demand.

One thing is guaranteed: the kingdom will not go back to the old pattern of cutting output any time soon to support prices for the benefit of all producers, Saudi sources say.

"The bottom line is that there will be no free riders any more," al-Madi said at Monday's meeting. "Some OPEC members should 'walk the talk' first," he told his colleagues.

Even Riyadh's rivals doubt it will perform any U-turn. "Saudi Arabia doesn't give a damn about OPEC any more. They are after U.S. shale, Canadian oil sands and Russia," a non-Gulf OPEC source said.

Article Link to Reuters:

Today's Stock In Play Is Eleven Biotherapeutics (Symbol EBIO)

EU ‘Sacrifices’ Press Freedom For Turkish Help

Rights groups say migration plan ignores Turkey’s worsening record on human rights.

Politico EU
May 5, 2016

LONDON — It didn’t take long for the platitudes about press freedom to fall foul of the messy political reality of Europe’s migration crisis.

A day after stressing their commitment to free speech to mark World Press Freedom Day, European commissioners were accused of abandoning those principles to win the favor of one of the region’s most repressive autocrats.

The Commission’s recommendation on Wednesday that Turks be granted visa-free travel in the EU — seen by many as a major diplomatic concession to Ankara — was met with dismay by human rights activists and media groups, who accused them of kowtowing to President Recep Tayyip Erdoğan to secure his help in stopping the flow of migrants into Europe.

“Short-sightedly, the EU has cast aside its core values such as freedom of expression,” Katie Morris, head of Europe and Central Asia at human rights NGO Article 19, said. “It has thrown out its most dearly-held value, which renders hollow any future attempts to promote democracy within Europe or internationally.”

The Commission has “abandoned the many journalists, editors and writers in Turkey who face prosecution, imprisonment, harassment and even death for speaking out,” Jo Glanville, director of English PEN, a writers’ association, said.

Not only is the Commission’s pursuit of a deal with Erdoğan a betrayal of the Turkish media organizations and journalists that have been victimized by his administration, the critics said, it’s also a signal to other regimes that they can act with impunity against their critics — so long as Brussels needs their support.

The Commission may have felt it had little choice. Unless its people are allowed visa-free travel in Europe’s passport-free Schengen area, Turkey would refuse to cooperate on controlling migration.

Officials insisted the deal is conditional on Ankara making urgent progress to meet criteria it hasn’t already fulfilled, including controlling corruption and aligning its terrorism legislation with the rest of Europe. Commission First Vice President Frans Timmermans insisted Turkey will not get a “free ride.”

Press freedom is not an explicit requirement for visa liberalization, only part of the bigger picture. Timmermans was nevertheless asked about it at a press conference Wednesday. He told journalists: “If they want to come closer to the European Union they will need to come closer to our norms.”

Pushing Turkey further away because of its human rights record would not be the answer, Timmermans said. Ankara is “going away from us on freedom of press. That needs to be changed, and it can only be changed if they come closer to us.”

“Just shouting at them and turning our backs on them will not improve the situation,” Timmermans said.

Jailed and gagged

Journalism, free speech and human rights groups, including Article 19, Index on Censorship and Reporters Without Borders, had urged the Commission not to strike any bargains with Turkey until it improves its treatment of the press.

Dozens of journalists have been imprisoned for writing critical articles, often under anti-terrorism laws. Others have lost their jobs or been stripped of official accreditation. In one of the most prominent cases, Can Dündar and Erdem Gül of the opposition daily Cumhuriyet are facing life sentences for espionage and divulging state secrets after they reported that Turkey had delivered arms to Islamist rebels in Syria.

Opposition-owned newspapers and broadcasters have been subjected to punitive taxation or seized by the government. In March, armed police stormed the offices of the biggest-selling daily paper, Zaman. Its editor was fired, new management brought in, and the editorial tone changed to be friendly to the government.

Erdoğan’s blunt suppression of his critics has even extended to pursuing journalists in Western Europe: namely the criminal investigation into the German comedian Jan Böhmermann, who extravagantly insulted the Turkish leader in a TV broadcast on March 31. Chancellor Angela Merkel last month agreed to a formal request by Turkey to launch a criminal investigation on charges that Böhmermann insulted a foreign head of state, prompting an angry debate about the limits of free expression.

In an interview with the German newspaper Die Zeit published Tuesday, Böhmermann accused Merkel of “serving me up for tea” by acceding to the Turkish demand. “The chancellor must not wobble when it comes to freedom of speech,” he said.

In Turkey, there are few critical voices left, analysts say. The EU’s failure to take a tough line with Erdoğan will encourage him to wipe out what is left of his critics, they fear.

“If everything will be given to the Turkish government I believe that the government and Erdoğan won’t hesitate to take over all the media landscape here in Turkey,” freelance journalist Banu Guven told BBC Radio 4’s Today program on Wednesday.

Nina Ognianova, of the Committee to Protect Journalists, said: “European Union leaders must make clear to the Turkish government that any concessions, such as visa-free travel to Europe, are conditioned on specific, meaningful steps by Turkey to improve press freedom at home.”

“It is overdue time for EU leaders to call on Turkey to reverse such actions as the forcible takeover of opposition media outlets, the politically motivated prosecution and imprisonment of journalists on trumped-up charges, the barring of foreign journalists from Turkey, and the arbitrary use of insult and anti-terror laws to punish critics.”

The Commission flagged concerns about Turkey’s treatment of the press in a “staff working document” accompanying its report on Turkey’s progress in fulfilling the requirements for being granted visa liberalization.

It noted: “The recurring arrests and prosecutions of journalists and academics on terrorist-related charges, including the provision on ‘making propaganda for a terrorist organization’ have a detrimental effect on freedom of expression and lead to self-censorship, as noted by the Commissioner for Human Rights in his recent statements on Turkey.”

However, press freedom was only one of many considerations as European leaders looked for a speedy solution to the migration crisis.

If it’s OK for Turkey…

NGOs are concerned there will be a long-term cost to their expediency. Media freedom is already deteriorating across the region, and it could get worse if the rights of journalists is seen as something Brussels is willing to trade away for political gain.

Overlooking Turkey’s violations could encourage others to stifle dissent in their countries. Of particular concern are states in the Balkans, including Serbia and Bosnia, which aspire to join the EU but have a poor record of protecting free speech. The EU has not done enough to “use the stick” to force those countries to improve their human rights record, Dunja Mijatovic, the Organization for Security and Co-operation in Europe’s representative on freedom of the media, told POLITICO last month.

The Commission’s agreement with Turkey “sends a worrying message to the rest of the world that the EU will sacrifice its principles in the name of expediency,” Glanville, of English PEN, said Wednesday.

Turkey has until June to meet all the criteria for visa liberalization and the measure is likely to face opposition in the European Parliament, which has the power to block it.

Guy Verhofstadt, leader of the Alliance of Liberals and Democrats for Europe group in the European Parliament, said it should not go ahead until the Turkish government stops undermining media outlets.

“Press freedom and freedom of expression are fundamental values of the European Union,” he said.

Article Link to Politico EU:

Growth In China Is Slowing, But So What?

By Byron Wien
Real Clear Markets
May 5, 2016

By this time there is not a business person in the western world who doesn't know that the Chinese economy is not moving ahead at the torrid pace of five years ago. China has grown to become the second largest economy in the world and the law of large numbers is in its way. In the first quarter, it reported 4.5% real GDP growth, the lowest since 2010. In order to reach the annualized rate of 6.7%, growth in the next two quarters would need to be 7.4%, which seems hard to achieve. I have been projecting (guessing) overall Chinese real growth of 4.5% and arguing with clients and analysts about whether I am too low or too high. The real question is, how much does this matter? If you are an agricultural or industrial commodity exporter like Brazil or Australia, the Chinese growth rate means a lot. If you are a Hong Kong businessman/ entrepreneur looking for deals, there is plenty to keep you busy.

I have just returned from a trip to Singapore, Hong Kong, Beijing, Shanghai and Tokyo, meeting with sovereign wealth funds, other clients, policy officials and business people. While everyone is aware of the slowdown in China, very few expect a hard landing caused by a real estate bubble, a banking collapse related to non-performing loans or other factors. There is a general recognition that Xi Jinping is centralizing his leadership and taking control of the media and the military, but he is also accomplishing a necessary goal. Official corruption had reached a level where it was causing the general population to lose confidence in the central government. The average person had enjoyed more economic opportunity in the last fifty years, but they were angered by local and national officials accumulating considerable assets and flaunting their wealth (or their children doing so). In addition, growth was accompanied by an excessively restrictive regulatory environment in the view of most observers.

Xi realized this situation had to change. He began a vigorous anti-corruption campaign to re-establish the legitimacy of the Communist Party and its leadership and to restore the confidence of the general population. I attended a small dinner with Dr. Henry Kissinger a few weeks ago and asked him about the anti-corruption program. (Kissinger is a hero of mine because he is still well-connected and relevant at 93.) He told me Xi's goal was to eliminate the corruption that resulted in wealth creation, not the corruption that facilitated the ease of doing business. If you want to get building materials delivered to your site during the day, rather than at night in accordance with the rules, you can still make a payment to someone to do that, but major gifts allowing many officials to build fortunes were stopped. Even the distribution of gift cards to ordinary employees to establish good will is over. As a result, gambling travel to Macau is down and luxury goods sales in Hong Kong have declined.

But business in China goes on. The consumer sector continues to grow in importance in the overall economy. The government is still engaged in fiscal spending and monetary accommodation but the economic planning officials recognize that the future depends on consumers becoming an increasingly larger portion of GDP. The Chinese consumer is currently a smaller part of its economy than the consumer in any major industrialized nation, and rebalancing has a long way to go. As for government expenditures on infrastructure, there is also much to be done. Most visitors to China are aware of the dazzling roads and buildings in Beijing and Shanghai, but China has more than 100 cities with a population of one million or more. Many of these are in the western and northern parts of the country and need infrastructure improvements of all types. This should provide many jobs for some time to come, increasing the overall wealth of the more remote parts of the country. If growth in China were closer to 5% than 7%, is that so bad? China will still be able to create ten million or more jobs annually. The United States, Japan or Europe would be thrilled to grow at that rate. Why should we all be wringing our hands because growth has slowed to the mid-single-digit level? As Jon Gray, who runs Blackstone's Real Estate division told me, "Our malls in China had annual sales increases of 18% a few years ago; then that went down to 12% and now it's 8% - but 8% is still pretty good."

China is not, however, without serious problems. It has too much capacity in many basic industries and some of it is obsolete. It has a large number of non-performing loans on the books of its banks and many of these will never be paid back. Because the banking system is integrated into the People's Bank of China, the assumption is that there won't be a banking meltdown, but that may not be right. While to the outside world China does not seem to be under financial stress, Chinese debt has escalated more than 50% since the recession of 2008-9 and its foreign exchange reserves have been drawn down sharply by 20% to maintain the value of the renminbi.

We also know that the social safety net needs a lot of work. China has weak retirement support for its aging population and has no universal healthcare. As a result, consumers save as much as 50% of their income so they have the resources to deal with unexpected circumstances. This affects growth, and few involved in China expect these conditions to change in the near term.

Real estate is key to financial stability in China. The combination of monetary accommodation and relaxed rules relating to owning more than one residence have propped up the market and prices are rising in many of the 100 largest cities, but observers are worried that this won't last. Consequently, one of China's major problems is capital flight. Wealthy Chinese have been trying to move assets out of the country for several years. I think it is fair to ask, "If there are so many investment opportunities in China, why are many people trying to get their money out?"

The answer is that China is filled with uncertainties as well. The extreme volatility of the Chinese stock market made domestic investors apprehensive about investing in financial assets at home. Apartment prices in the top tier markets like Beijing and Shanghai are clearly expensive and have been rising yet higher. In second tier cities there are still good values, but future economic opportunity is less clear there. Young people want to live in Beijing or Shanghai just as they want to live in New York or San Francisco in the United States or London and Paris in Europe and the real estate values reflect the popularity of these places. Talk about unintended consequences: the hope behind the high-speed rail system was that young people could live and work in smaller cities near their families and travel by train to Beijing and Shanghai on weekends. What happened was that the millennials chose to live in the big cities and travel to visit their families on weekends. Still, in a country with continued growth and 1.3 billion people, many other cities will emerge as attractive places to live over time. The major cities are so built up and dense that the logistics of living in those places is making them less desirable.

The Chinese practice of buying multiple apartments to store personal wealth points out one of the true tragedies of the country's financial planning. Perhaps because the stock market was viewed as the quintessential manifestation of the capitalist experience, the Chinese leadership never took it seriously enough or saw its opportunities. It should have demanded more transparency through regulation and required more responsible accounting. Their dilatory attitude resulted in extreme volatility in the "A" share market, especially after the financial crisis of 2008. Because of this, there was a period when the stock market was closed down and investors lost access to their assets.

While only about 10%-20% of the Chinese population participated in the market before the closure and few institutions were involved, this action dealt a serious blow to confidence. Before the closure, the government participated in the market aggressively to boost prices. This intervention hurt confidence as well, and it will take a long time to repair the damage. This is sad because the Chinese are natural entrepreneurs and investors and if the financial markets were properly regulated, equities could have become an important and constructive part of the business culture. Had that happened, the problems with capital flight could have been severely reduced.

In several of my meetings, Chinese innovation was a subject of debate. Given that Chinese immigrants often do extremely well in American high schools and universities, why are we not seeing more technology breakthroughs coming out of the country? One reason is that the Chinese higher education system is teaching-oriented and research plays a smaller role than it does in American universities. A second reason is that there is little government money for research. Finally, the venture capital market is just getting going in China, so while the talent is there, the money isn't. This is changing and we will see more new products coming out of China in the coming years. Drones and animation are on the planning boards. The Chinese are also working to advance healthcare and education practices.

While China has relaxed its "one child" policy, this change may be slow in having an impact. Raising a child is expensive in China and apartments are small. 2015 was the year of the sheep - a bad time to have a child. 2016 is the year of the monkey - a much better time for giving birth. The authorities expect a surge. The change in the one child policy may get more traction in non-urban areas. Over time, larger families will surely contribute to growth.

Xi Jinping has focused on corruption, but he needs to pay more attention to the operation of state-owned enterprises. Because these companies are extensions of the government, they are not held accountable in the same way as western companies. While profits are a goal, the employment of a maximum number of people is also an objective. This has to change in order to sustain productivity and growth, but labor efficiencies were given lower priority on the list of planned reforms. Banks also need to become more profit-oriented. One of the reasons there are so many non-performing loans on their books is that the managers know that big or small, they can't fail: the government will bail them out.

The key government objective is to maintain stability, not profitability. and the Chinese seem to accept that. One official told me that Xi is highly focused on the need to retain the approval of the people. Civil unrest is to be avoided at almost any cost. One of the reasons the Internet is so tightly controlled is to prevent those inside China from communicating with terrorist groups or having access to information that may lead to radical behavior. The Western press focuses on these restrictions on the freedom of Chinese individuals, but the average citizen is thinking more about his or her job and the quality of life, and that is still improving. First Amendment-type policy issues are less important.

The situation in Japan is very different. The combination of negative interest rates and the failure of Shinzo Abe's "Three Arrow" policy to stimulate growth with modest inflation has left the people disheartened. In conversations with investors there, I got the feeling that many had lost hope that stronger growth and opportunities for wealth creation were ahead. Japan's decision not to provide further economic stimulus at the end of April was a sign of leadership confusion. Investors expected vigorous monetary expansion to weaken the yen but, instead, the currency strengthened and hurt exports. Officials don't know why. They have chosen not to initiate further policy moves until they understand the situation better. The market reaction to this indecision was negative.

Investors throughout Asia were concerned about the usual global issues that are on everyone's mind: interest rates, monetary policy, oil prices and sovereign debt levels. The most frequently asked question was, "In a slow-growth world economic environment is there any way for an institution to earn a reasonable return for its clients?" In the past 25 years, high-single-digit returns or more were possible, but now with interest rates low and the markets choppy it may be hard to achieve half of that rate of portfolio appreciation. In addition to that near-term concern, very few have an answer to the question of what will change the outlook.

Article Link to Real Clear Markets:

Thursday, May 5, Morning Global Market Roundup: Europe shares, Oil Snap Four-Day Losing Streaks

By Marc Jones
May 5, 2016

European stocks and oil prices snapped a four-day losing streak on Thursday and a rally in bond markets fizzled out as investors began to position themselves for U.S. jobs data.

The pan-European FTSEurofirst 300 index .FTEU3, which had fallen 1.2 percent to its lowest level in nearly a month in the previous session, rebounded 0.3 percent as firmer oil prices helped lift the region's big producers.

Asian shares failed to avoid a seventh day of falls but there was a feeling of relief that at least the yen JPY= looked to have settled following a searing run this month that has sent it to an 18-month high.

Prime Minister Shinzo Abe said on Wednesday that Japan would act if necessary to weaken the yen, while the dollar has been supported by data which has fanned optimism that the U.S. economy could bounce back after nearly stalling this year.

The dollar was holding at 107.10 yen JPY= in European trading, above the recent 18-month trough of 105.55 but a long way from last week's peak of 111.88.

The euro changed hands at $1.1454 EUR=, having been as high as $1.1614 this week from a low of $1.1213 in April. Against a basket of currencies the dollar was up 0.3 percent at 93.456 .DXY.

In commodity markets, industrial metals including copper and iron ore nursed more losses. Oil bounced as a huge wildfire in Canada disrupted oil sands production and escalating fighting in Libya threatened the North African nation's output.

Brent crude LCOc1 was quoted 71 cents higher at $45.33 a barrel, while U.S. crude CLc1 added 89 cents to $44.67.

Bond markets had noticeably cooler feel, having seen one of their sharpest rallies of the year so far over the last week.

Yields on 10-year German Bunds and U.S. Treasury notes edged up to 1.179 and 0.208 percent receptively having both just hit their lowest in two weeks US10YT=RRDE10YT=RR.

The gap between Italian and German government borrowing costs hit its widest level in nine weeks however, after Rome announced an unscheduled bond exchange and investors readied for a series of political events in Europe.

Stalled talks between Greece and its international creditors over financial aid, as well as Spanish elections and Britain's referendum on EU membership next month have led investors to reduce their exposure to riskier assets.

"There is a bit of (debt) supply to be absorbed this week and market sentiment is we are cautious on the direction for the periphery and expect more volatility," Mizuho strategist Antoine Bouvet said.

Talking Turkey

Turkish stocks fell and bond yields surged after officials said overnight the ruling party was set to replace Prime Minister Ahmet Davutoglu at an extraordinary congress in coming weeks.

The decision, confirmed to Reuters by five AK Party officials, came after a meeting of more than 1-1/2 hours between Davutoglu and President Tayyip Erdogan that followed weeks of public tension between the two men.

The lira bounced over 1.4 percent to 1.915 per dollar TRY= in volatile early deals in Istanbul but that was preceded by a three-day pounding that was one of its worst in decades.

"The political environment is very unpredictable, and this will certainly have negative repercussions for Turkey's risk premium, financial volatility and macroeconomic outlook," Finansbank said in a note.

The seventh straight dip for Asian shares overnight followed mixed economic data that did nothing to assuage concerns about global growth.

The latest survey from China showed the service sector expanded at a slower pace in April, though firms did resume adding staff.

The Caixin/Markit services purchasing managers' index (PMI) dropped to 51.8, from 52.2 in March, but at least stayed in growth territory. Hong Kong's version of the PMI slid into a deeper contraction to touch an eight-month low.

The patchy outcomes left Shanghai stocks .SSEC flat while trade across the region was stifled by a holiday in Japan.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS eased 0.3 percent, and has now shed 5 percent in just two weeks.

Wall Street also slipped amid mixed data.

The vast U.S. services sector expanded in April as new orders and employment accelerated, offering hope economic growth would rebound after a sluggish first quarter.

But other figures showed private employers hired the fewest workers in three years, sparking concerns the all-important payrolls report might also disappoint.

Friday's jobs figures are forecast to show a solid gain of 202,000 in April with unemployment steady at 5 percent.

"I think what has taken place more than anything else over the past 48 hours is the questioning of the reflation trade that was starting to be latched on by many, especially when you consider the recent price action in the USD, commodities and equities," CitiFX analysts said in a note.

Here’s What Bookies Think Of A Trump-Clinton Showdown

By David K. Li and Bob Fredericks
The New York Post
May 4, 2016 

Donald Trump may feel invincible right now, but he’s still an underdog going into the general election.

Hillary Clinton is the favorite to win in November at odds of 4-11, according to the online bookmaker Ladbrokes — meaning you’d have to wager $11 to win $4.

The New York City tycoon, meanwhile, is a 9-4 underdog, according to the bookmaker’s Web site.

Betting on the presidential race is illegal in the United States, but the online odds capture the current zeitgeist.

“The interest is huge,” said UK-based Ladbrokes spokesman Alex Donohue. “We can’t get Donald Trump off the pages of our newspapers and our TV screens.”

So, who do the oddsmakers like for vice president?

Ohio Gov. John Kasich, who was the last man standing against Trump before he quit Wednesday, comes in at 4-1. Right behind him is New Jersey Gov. Chris Christie at 6-1, according to Ladbrokes.

Clinton hasn’t sewn up the nomination yet, but the oddsmakers like HUD Secretary Julian Castro (9-4) for running mate. Virginia Sen. Tim Kaine and Mass. Sen. Elizabeth Warren are tied at 6-1 in the Democratic veepstakes.

For Trump to overcome the odds, he’ll likely have to mend fences in the Republican Party. On Wednesday, he said he wanted to unify the GOP — and some Republican bigs have already kowtowed to the billionaire businessman.

“You know what, I think something different and something new is probably good for our party,” Republican National Committee chair Reince Priebus cooed on CNN Wednesday morning — after months of bashing Trump. “So, look, we’re here. We’re going to get behind the presumptive nominee.”

And Ed Rollins, Ronald Reagan’s former campaign manager, climbed aboard the bandwagon earlier this week, saying he would head up a new pro-Trump super PAC.

Trump said on the “Today” show he was “confident I can unite much of” the party, but he still showed his trademark bite, saying there are some GOPers he finds so odious he wouldn’t want their support.

“Those people can go away and maybe come back in eight years after we served two terms.

Honestly, there are some people I really don’t want,” the presumptive GOP nominee said.

Apparently, the feeling is mutual because some Republicans have already said they would enthusiastically support Clinton over Trump.

“The GOP is going to nominate for president a guy who reads the National Enquirer and thinks it’s on-the-level,” Mark Salter, a top aide to GOP nominee John McCain in 2008, wrote on Twitter late Tuesday, adding “I’m with her” — a Clinton slogan.

Steve Schmidt, the GOP strategist central to McCain’s 2008 campaign, told Politico that “a substantial amount of Republican officials who have worked in Republican administrations, especially on issues of defense and national security, will endorse Hillary Clinton in the campaign.”

Other GOP power players remain wary of Trump and have insisted they could never support him.

“The answer is simple: No,” tweeted Nebraska Sen. Ben Sasse.

A spokesman for George W. Bush says the former president does “not plan to participate in or comment on” the presidential race.

Team Clinton on Wednesday released a list of more than two dozen Republican and conservative pols, operatives and pundits who were already on record opposing Trump.

At any rate, voters should expect a bloody six-month Clash of the Titans between Trump and Clinton — replete with vicious name-calling, a swamp’s worth of mudslinging and billions of dollars of ugly negative ads on radio and TV.

The fiercest fights are likely to be waged in populous swing states such as Florida, Pennsylvania, Ohio and Michigan, where the outcomes could determine the eventual winner.

Article Link to the New York Post:

Spies Worry Trump Will Spill Secrets

Take a conspiracy-minded, shoot-from-the-hip GOP candidate. Add classified briefings. Watch current and former intelligence officials squirm.

By Shane Harris
The Daily Beast
May 5, 2016

After Donald Trump is formally chosen as the Republican presidential nominee, he’ll be able to receive classified U.S. intelligence briefings, which could include some of the same sensitive information that President Obama is given in the Oval Office.

And that prospect has some spies sweating. Trump, who can’t seem to dam his stream of consciousness on Twitter, and who has lately taken to spreading rumors and conspiracy theories on national television, has never been privy to national secrets. Nor has he ever demonstrated that he’s capable of keeping them.

“My concern with Trump will be that he inadvertently leaks, because as he speaks extemporaneously, he’ll pull something out of his hat that he heard in a briefing and say it,” said a former senior U.S. intelligence official who has participated in the process of briefing presidential candidates.

Unlike his presumed rival, former Secretary of State Hillary Clinton, who would receive the same briefing if she’s the Democratic Party nominee, Trump has never sat across the table from U.S. intelligence analysts and been given updates on the latest machinations of ISIS, or efforts by foreign governments to penetrate American computer networks. He also has selected a team of largely unknown advisers who might have trouble helping him to contextualize what he might hear and know what questions to ask. (Of course, Trump isn’t under FBI investigation for potentially spilling secrets from his private email server, like his Democratic rival.)

Trump’s improvisational public speaking style, coupled with his penchant for making unverified—and unverifiable—claims, could make for especially tense sessions. Presidential candidates are given their briefings in highly-secured facilities, in part to impress upon them the sensitive nature of what they’re hearing.

“It’s not an unreasonable concern that he’ll talk publicly about what’s supposed to stay in that room,” said another former senior intelligence official.

A currently serving U.S. official echoed some of those anxieties and wondered whether Trump would respect the discretion of the briefing and not use it to his advantage on the campaign trail.

The current and former officials asked to speak anonymously in order to express their concerns about the upcoming briefings.

Spokespersons for the Trump and Clinton campaigns didn’t respond to requests for comment.

For their part, the spies who’ll actually be sharing secrets with Trump and Clinton—presuming they’re ultimately the nominees—have been busy preparing for meetings that could take place as soon as the conventions are wrapped up.

“We have already established a plan for briefing both candidates when they are named, and certainly after the November when the president-elect is known, and it gets more intensive,” Director of National Intelligence James Clapper said in response to a question from The Daily Beast at a meeting with reporters in Washington last week.

Asked what precautions the intelligence community would take to ensure that any classified information the candidates received was not mishandled, Clapper said that the briefings, per custom, would be given in a secure facility wherever it was most convenient for the nominees, and according to their schedule. In 2008, Sen. Barack Obama was briefed by Director of National Intelligence Mike McConnell at an FBI building in Chicago, the city where he also had his campaign headquarters.

Clapper said that his office had already set up a team to prepare the briefings and that a “designated lead,” who is not a political appointee, is running the effort.

Once a briefer is chosen to meet with the nominees, the intelligence director’s office will “oversee [the process] to ensure that everybody gets the same information and that we do comply with the needs to protect sources and methods and comply with security rules.”

The nominees, in that sense, are on an even playing field. Trump and Clinton would receive the same information, a sort of sanitized version of the President’s Daily Brief, which lays out various national security threats and concerns and areas of interest. But it will be stripped of the most sensitive information about ongoing operations or covert programs, officials and experts said.

“They’ll get a top secret briefing, but it won’t contain code word information,” said Tim Naftali, an intelligence expert and professor at New York University. “And I doubt they’d be getting any information about nuclear weapons. But it will be a discussion of the world, threats to the nation, how the war in Syria is going.”

Immediately after the election, the president-elect would likely be privy to the same information the current commander-in-chief sees. His or her staff will begin moving into presidential transition offices that have been outfitted with secure rooms and computers. One former official said that on the night of the 2012 election, there were representatives from Gov. Mitt Romney’s national security team waiting near a transition office in Washington to begin getting the Republican nominee up to speed should he be elected.

But from nomination to election to inauguration, it’s ultimately the president’s call how much information the rivals for the Oval Office get to see. He can dial up or down the amount of classified information. So long as both Trump and Clinton see the same things, Obama could effectively limit each of them to bening information that’s less revealing that what they might read in a newspaper.

George W. Bush, who directed that Obama and his opponent, Sen. John McCain, get comprehensive briefings on the campaign trail, still withheld information that revealed the sources and methods of intelligence activities, as well as information about covert operations, said Martha Kumar, a historian and author of Before the Oath, a book on the Bush-to-Obama transition.

Some of Bush’s prohibition extended even to president-elect Obama.

Steve Hadley, who had served as Bush’s national security adviser, told Kumar that the president felt sources and methods information was more than an elected president needed to know before he formally took office.

“When the man comes in and is president, sitting in this chair, that’s time enough,” Bush said.

The candidates have some say in the process as well, namely, how many briefings they want to receive. Historically, many of them have found the demands of the campaign trail too consuming to take the time out to and sit in a secure facility. The candidates also cannot take staffers who don’t have the proper security clearances into the room with them.

Nafatali said he’d be surprised if Trump in particular wanted more than one, customary briefing.

“Politically, I think for many candidates, it’s better that they don’t know things,” Naftali said. “They might realize how vacuous their foreign policy thinking was.”

Trump has made a pillar of his candidacy the argument that the Obama administration has utterly failed to counter its strategic rivals, from ISIS to Russia to China.

“Once candidates get secret information, they realize that there aren’t answers for every problem, but they also discover that the U.S. government is not neglecting all these problems,” Naftali said. “It makes some of their arguments on the stump completely hypocritical.”

For Trump, the temptation to blab about what he learned in a classified briefing might be great. But the smarter move might be to nod politely and forget what he heard.

Article Link to the Daily Beast:

Coal Country Loves Coal-Hating Bernie Sanders

Sure, Bernie Sanders hates coal, but he’s not all over TV talking about it like Hillary Clinton—and he’s likely to take West Virginia.

By Betsy Woodruff
The Daily Beast
May 5, 2016

A funny thing happened on the way to the West Virginia primary: Mountaineers decided they didn’t like the wife of a man they sent to the White House twice, and voted for in a race of her own eight years ago. Instead, they may prefer one of the most anti-coal candidates in American history.

It wasn’t always like this. In 2008—Hillary Clinton won a Democratic primary there, and by 41 points to boot. But now, oddly enough, it’s become highly amenable to Bernie Sanders.

And even though Clinton can skate to the Democratic nomination without winning West Virginia, a victory gives Sanders another chance to claim momentum—prolonging a slog of a primary. And she may still pull off a win in the state, but available public polling indicates it could be tough.

So she’s spent time trying to court its voters—and it hasn’t gone so well. Her struggles highlight just how much the state has changed—and how consistently bizarre this election cycle has been.

The few polls there are in the state haven’t been kind to Clinton. In February, a MetroNews West Virginia poll gave Sanders a lead of nearly 30 points. It showed him besting her in every age group except senior citizens. A Public Policy Polling poll of the state taken from April 29 to May 1 gave him a much smaller but still sizable lead of 8 percentage points.

Hoppy Kercheval, a longtime West Virginia talk radio host, said he thinks MetroNews’ next public poll will give Sanders an even smaller lead.

Still, they aren’t the kind of numbers Clinton would like in a state where she and her husband have cleaned up.

George Carenbauer, a former chairman of the state’s Democratic Party who supports Clinton, said a TV ad for an obscure Supreme Court race has hurt her. Beth Walker, a conservative running for the state supreme court, has cut an ad that shows a Clinton quote suggesting she wanted coal miners to lose their jobs.

“We are going to put a lot of coal miners out of business. -Hillary Clinton” reads text highlighted onscreen in the spot.

Clinton took significant criticism from West Virginians for that comment, which she made at a March CNN forum. And when a West Virginia miner confronted her about it earlier this month, she repented—sort of.

“What I said was totally out of context from what I meant because I have been talking about helping coal country for a very long time,” she told the miner, according to NBC. “What I was saying is that the way things are going now, we will continue to lose jobs. That’s what I meant to say.”

But that doesn’t matter one bit for TV ads.

“You can’t turn on the TV without seeing that clip,” said Carenbauer of Walker’s ad.

Neither Clinton nor Sanders are spending big on West Virginia, so Walker’s ad has gone largely unanswered.

Kercheval said the dynamic is a bit odd. Sanders is to Clinton’s left on energy issues—for instance, he supports an outright ban on fracking, while she doesn’t—but that one comment she made seems to have permanently tarred her in the state.

“It’s funny, because Sanders is far more anti-fossil fuel,” Kercheval said. “But that statement by Hillary is like—the bell got rung.”

Kent Carper, a Kanawha County Commissioner and Democrat who backs Clinton, said Sanders’ support puzzles him.

“His record on fossil fuel makes Hillary look like the Chamber of Commerce,” he said. “He wants to eliminate fracking! That’s the only thing we got left, really. I’m not saying it’s good for anything other than a bunch of people making money off it, but he is totally against extraction of fossil fuels which is what, unfortunately, we’ve depended on for our whole life.”

But Sanders’ populist rhetoric and perceived authenticity have given him a boost, according to long-time West Virginia political observers—a state that’s long been in miserable economic shape, and has been hit hard by the worst of the opiate epidemic. Analysis from West Virginia University shows that the state lost 8,000 jobs over the last three years and has the country’s lowest labor force participation rate. According to the Centers for Disease Control, West Virginians have one of the shortest life expectancy rates in the country. The Charleston Gazette found last summer that, per capita, West Virginia had twice the national average of deaths related to drug overdoses. And prescription drug abuse has devastated the state; the Charleston Gazette-Mail reported that over five years, wholesale drug distributors sent 200 million pain pills to the state (more than 100 per person).

“People are in a lot of pain in this state,” said Danny Jones, the Republican mayor of Charleston. “Donald Trump speaks to their pain.”

So does Sanders, other observers add, saying Clinton’s comment on miners’ jobs confirmed all their suspicions about D.C. politicians.

“It plays into the fears of, ‘Washington doesn’t understand us, Washington doesn’t understand our economy, Washington doesn’t understand what we’re going through,” said Mike Plante, a Democratic consultant based in Charleston. “That certainly has stoked some anti-Clinton folks in favor of Sen. Sanders.”

“It’s not so much individual policy issues as it’s what his candidacy symbolizes,” Plante added, citing Sanders’ perception as an outsider candidate. “The largest single factor, I believe, is the symbolism of the campaign.”

And Sanders’ comparative friendliness to gun rights plays well in the state, he added. On top of that, his rhetoric on trade deals has appeal for union workers who tend to oppose agreements like NAFTA.

For all practical purposes, West Virginia is a southern state with a very low African-American population and a comparatively high organized labor presence, Plante said. In other words, you could hardly make a state in a lab that would be better for Sanders.

The Vermont senator benefits greatly from its demographic homogeneity. Unlike other southern-ish states, West Virginia is overwhelmingly white—according to 2014 census data, less than 4 percent of West Virginians are African-American, and less than 2 percent are Hispanic. Carenbauer said this likely boosts Donald Trump as well.

“It’s a very odd thing that a message that says ‘Build a wall to keep Mexicans out’ resonates well in a state where there are no Mexicans at all,” Carenbauer said. “It’s a fact. I don’t understand it, but it’s a fact.”

And a central component of Clinton’s primary strategy is also a liability there: her propensity to mention Obama every ten seconds. Gallup found that in 2013, only Wyoming had a smaller percentage of residents who approved of him. In 2012, convicted felon Keith Judd racked up 41 percent of the state’s Democratic primary votes. West Virginians don’t like Obama.

“Even if you’re running for county commissioner, people run against Obama here,” Kercheval said.

West Virginia’s three electoral college votes have had historic import; in the final count in 2000, Al Gore lost to George W. Bush by three votes—and he lost West Virginia, after Clinton won it twice. So taking the state for granted hasn’t served Democrats well. Jones, who wasn’t ready to commit to voting for the party’s presumptive nominee, said Clinton’s best bet in West Virginia is just to write it off.

“It’s not only in the bag—it’s down the chimney in the stocking,” he said. “Donald Trump will beat her so bad.”

Article Link to the Daily Beast;

Trump vs. Hillary Is Nationalism vs. Globalism, 2016

This election's real political fault line.

By Robert W. Merry
The National Interest
May 4, 2016

The pundits and commentators and pols and prognosticators will all identify multifarious political fault lines to explain the looming epic American battle between Donald Trump and Hillary Clinton – women vs. Trump; evangelicals vs. Hillary; Hispanics vs. white, working-class Americans with no college; the LBGT community vs. traditionalists; old vs. young. It’s all important, but not very. Any true understanding of this election requires an appreciation of the one huge political fault line that is driving America into a period of serious political tremors, certain to jolt the political Richter scale. It is nationalists vs. globalists.

Globalists captured much of American society long ago by capturing the bulk of the nation’s elite institutions—the media, academia, big corporations, big finance, Hollywood, think tanks, NGOs, charitable foundations. So powerful are these institutions—in themselves and, even more so, collectively—that the elites running them thought that their political victories were complete and final. That’s why we have witnessed in recent years a quantum expansion of social and political arrogance on the part of these high-flyers.

Then along comes Donald Trump and upends the whole thing. Just about every major issue that this super-rich political neophyte has thrown at the elites turns out to be anti-globalist and pro-nationalist. And that is the single most significant factor in his unprecedented and totally unanticipated rise. Consider some examples:

Immigration: Nationalists believe that any true nation must have clearly delineated and protected borders, otherwise it isn’t really a nation. They also believe that their nation’s cultural heritage is sacred and needs to be protected, whereas mass immigration from far-flung lands could undermine the national commitment to that heritage. Globalists don’t care about borders. They believe the nation-state is obsolete, a relic of the 1648 Peace of Westphalia, which codified the recognition of co-existing nation states. Globalists reject Westphalia in favor of an integrated world with information, money, goods and people traversing the globe at accelerating speeds without much regard to traditional concepts of nationhood or borders.

Foreign Policy:
Globalists are motivated by humanitarian impulses. For them, the rights and well-being of the world’s people supersede the rights and well-being of the American populace. Indeed, as writer Robert D. Kaplan has observed, the liberal embrace of universal principles as foreign-policy guidance "leads to a pacifist strain…when it comes to defending our hard-core national interest, and an aggressive strain when it comes to defending human rights." Globalists, in advocating foreign policy adventurism, are quick to conflate events in the Baltics, say, or Georgia or Ukraine with U.S. national interest, but it’s really about the globalist impulse of dominating world events. Nationalists don’t care about dominating world events. Being nationalists, they want their country to be powerful, with plenty of military reach, but mostly to protect American national interests. They usually ask a fundamental question when foreign adventures are proposed—whether the national interest justifies the expenditure of American blood and treasure on behalf of this or that military initiative. The fate of other people struggling around the globe, however heartrending, doesn’t usually figure large in nationalist considerations. The fate of America is the key.

Trade: The history of trade in America admits of no straight-line analysis. Andrew Jackson was a supreme nationalist, and a free-trader. William McKinley made America a global power, but was a protectionist. In our own time, though, the fault line is clear. Globalists salute the free flow of goods across national borders on the theory that this will foster ever greater global commerce, to the benefit of all peoples of all nations. Writer and commentator Thomas L. Friedman, a leading globalist of his generation, once extolled America as the world’s role model for "globally integrated free-market capitalism." That was before the Great Recession and the subsequent anemic recovery throughout most of the Obama years. Today’s American nationalists look at the results of the kind of "globalization" extolled by Friedman and conclude that it has hollowed out America’s industrial core. Whether they are right or not, their focus is on the American citizens whose lives and livelihoods have been also hollowed out in many instances. Thus has a powerful new wave of protectionism washed over the body politic, leaving globalist elites running to get out of the way. Globalists were too focused on global trade and commerce to notice the horrendous plight of America’s internal refugees from the industrial nation of old.

Political Correctness:
Given that globalists dominate the nation’s elite institutions and often exploit their position of power to ridicule and marginalize the so-called "Middle America" of ordinary citizens, who also happen to be nationalists, these people often feel on the defensive politically and culturally. And we are beginning to understand, courtesy of the Trump candidacy, just how angry they were at the emergence of the political correctness cadres who tell them what to think, how to regard the political issues of the day, and how they themselves will be regarded if they don’t toe the line (racist, homophobe and xenophobe are frequent threatened epithets). Globalists don’t care much about this phenomenon because it is employed largely in behalf of their views and philosophical outlook, including their globalist sensibilities. But nationalists care about it a lot. They send their kids to college in pursuit of betterment, and discover that political correctness is hammering away at the views and values they tried to teach their children as they were growing up. And their views and values aren’t allowed to compete in any free marketplace of ideas on campus but instead are declared inappropriate and intolerable before they are even uttered.

Cultural Heritage:
Nationalists care about their national heritage, which they view as a repository of wisdom and lessons handed down by our forebears in this grand experiment that is both mystifying and inspiring. Globalists, not so much. Nationalists seethe at the assault under way against so many giants of our heritage, flawed though they were (as are we today). Globalists are the ones leading the assault.

On all of these fault lines, we see just how much pressure has been building up in recent years while the globalist elites concluded the issues involved were either settled or under control. Immigration—much talk about the need for reform but nothing done while the influx continued. Foreign policy—polls showing many Americans wary of interventionist adventurism while interventionist adventurism remained the prevailing attitude of governmental elites. Trade—a solid consensus among elites that free trade had no serious opposition, while industrial America crumbled. Political correctness—a blithe disregard for the sensibilities of non-globalist citizens. Cultural heritage—the power of the influence class brought to bear against those who cherish their country’s history. It isn’t surprising that the globalist class concluded that it really didn’t have to worry about any serious opposition out in the country.

But they did, and Donald Trump was the messenger. He not only attacked out-of-control immigration but did it in such a way as to signal that this was one politician who truly intended to do something about it. Despite some of his boorish rhetoric, or perhaps even because of it, nationalist Americans perked up and rallied around. On foreign policy, he posed questions that nobody else was willing to raise: Why do we need NATO as currently constituted when the Soviet Union no longer exists to threaten Europe? Why should Americans pay for the defense of rich Europeans when they can easily afford to protect themselves? Why should America continue to pursue a policy of promiscuous regime change when recent history tells us it usually produces disaster and chaos? Why can’t the elites recognize and acknowledge the regional mess wrought by their ill-considered Iraq War? Trump answers these questions in ways that set the teeth of the elites on edge, but it turns out many Americans are asking the same questions and buying the Trump answers.

On trade, Trump isn’t exactly original in his protectionist leanings. Such thinking has played a significant role at various times in American history—in good times and bad. And as recently as 1988, Democrat Richard Gephardt ran on the issue of "economic nationalism." But once again Trump has upended the old politics and opened up a new fault line. On political correctness, he offers a counter-assault that is breathtaking in its political distinctiveness and force. And on cultural heritage, he said it all when he said, "We’re going to be saying Merry Christmas again, folks."

Hillary Clinton, meanwhile, is the personification of the globalist elite—generally open borders, humanitarian interventionist, traditionally a free trader (though hedging in recent months), totally in sync with the underlying sensibilities of political correctness, a practitioner of identity politics, which lies at the heart of the assault on the national heritage. Nothing reflects this Clinton identity more starkly than the Clinton Foundation, a brilliant program to chase masses of money from across borders to fund the underpinnings of an ongoing political machine.

It’s impossible to say at this early stage in the political season whether Trump, the candidate of the New Nationalism, actually has a chance to win the presidency. But, win or lose, he has shaken up the political system, introduced powerful new rhetoric and opened up a new political fault line between nationalism and globalism that isn’t going away anytime soon. For the globalist elites of America, it’s an entirely new era.

Article Link to the National Interest:

Oil Jumps On Canadian Wildfire, Libyan Fighting

By Henning Gloystein
May 5, 2016

Oil prices jumped on Thursday as a huge wildfire in Canada disrupted oil sands production, while escalating fighting in Libya threatened the North African nation's output.

International benchmark Brent crude futures were trading at $45.36 per barrel at 2.54 a.m. ET, up 74 cents or 1.7 percent from their last close, after three days of declining prices.

U.S. West Texas Intermediate (WTI) crude futures were up 95 cents, or 2.2 percent, at $44.73.

Traders said WTI prices were being driven up by an uncontrolled wildfire in Canada that disrupted oil production in the province of Alberta.

A massive wildfire has forced the evacuation of all 88,000 people in the western Canadian oil city of Fort McMurray and burned down 1,600 structures, and has the potential to destroy much of the town, authorities said.

With evacuees being told to head north toward Alberta's oil sand fields, and some pipelines in the region being shut as a precaution, output at several facilities has been disrupted, although the volume of the decline was unclear.

CNOOC Nexen said it was shutting down its 72,000 barrels per day (bpd) bitumen facility at Long Lake because of the fire threat.

Brent was pushed higher by escalating fighting in Libya.

Libya's already crippled oil production is at risk of further disruption from a stand-off between eastern and western political factions, which prevented a Glencore cargo from loading.

A Tripoli-based official warned the country's oil output could fall by 120,000 bpd if the Benghazi-based National Oil Corporation (NOC), set up by the rival eastern government, continues to block tankers loading for Tripoli from the eastern Marsa el-Hariga port.

Libya's output has already fallen to less than a quarter of its 2011 high of 1.6 million bpd.

Investment firm ETF Securities said that unplanned outages within the Organization of the Petroleum Exporting Countries (OPEC), including Libya, stood above 2 million bpd, the highest in at least five years.

Adding to these disruptions, U.S. production continues to fall, with the latest official figures showing a decline by over 8 percent since mid-2015 to 8.825 million bpd.

"Investor optimism for oil has markedly improved. We believe the gains in price are sustainable and not just driven by speculative gains. We are likely to be in a global oil supply deficit by Q3 2016," said Nitesh Shah, director of commodity strategy at ETF Securities.

Dutch bank ABN Amro said it had an "expectation of a further normalizing of the market balance between supply and demand, resulting in higher oil prices."

This optimism came despite another surge of 2.8 million barrels in U.S. commercial crude inventories to a fresh record of 543.394 million barrels.

Why Trump, Clinton Both Scare Netanyahu

Prime Minister Benjamin Netanyahu fears that if elected president, Hilary Clinton will hit the ground running and not stop until advancing the two-state solution.

May 5, 2016

With regard to the presidential campaign in the United States, Prime Minister Benjamin Netanyahu finds himself in the position he hates most: irrelevance.

In the 2012 elections, Netanyahu assiduously helped Republican candidate Mitt Romney. His close associate, gambling tycoon Sheldon Adelson, contributed tens of millions of dollars to the Republican campaign, and Netanyahu’s confidant Ron Dermer (who later became Israeli ambassador in Washington) operated a supportive network within the US Jewish community.

In the 2008 election campaign, Netanyahu was not yet prime minister, but secretly prayed for the victory of Republican candidate John McCain over the enigma that was Barack Obama.

This time, Netanyahu is helpless. Together with Adelson, Netanyahu sought the “right” candidate on the Republican side and preferred Marco Rubio. But he found himself, like America and the rest of the world, with something else altogether. Donald Trumpcaught Netanyahu and his people unprepared. Trump is not a “Beltway” man, he’s a total outsider. No one knows what to do with him, how to work with him and what the rules of the game are now.

The situation is not much better on the Democratic side. Hillary Clinton is the last person on the planet that Netanyahu wants to see in the White House, after Obama. Jerusalem is keeping a very close eye on the primaries and is beginning to internalize that Clinton is a done deal. Even her loss in Indiana has not changed this working assumption.

The anticipated race between Trump and Clinton is likely to place Netanyahu in a bizarre situation: He will not have a clue which candidate to support, or which is the lesser evil. Everyone agrees that it’s an impressive matchup.

The Clintons have a tradition of animosity toward Netanyahu. Netanyahu views Clinton as a sworn enemy, worse than Obama, for a simple reason: It will be very hard for him to set Israeli public opinion against her.

The information flowing into Jerusalem worries Netanyahu even more. According to reports transmitted by various Israeli emissaries and sources in the Democratic establishment, Clinton is building an extensive and powerful team that is preparing for the “day after” on the international and Middle East fronts. The team, according to the reports, encompasses several dozen experts. The large majority are volunteer workers, and a small part are on the payroll of the campaign.

Various reports on the issue have already been published in the United States (by John Hudson in Foreign Policy and Josh Rogin on Bloomberg). The names mentioned there do not encourage Netanyahu: Obama's adviser on the Iran deal Jake Sullivan, former State department official Laura Rosenberger and others. According to the reports, other former senior officials consulted include former Defense Secretary Leon Panetta, former top defense official Michele Flournoy and former Undersecretary of State Nick Burns. One way or the other, these are all people who were involved in the catastrophic and chaotic relations created between Netanyahu and the Obama administration over the last eight years.

Netanyahu’s mood can be expected to deteriorate even more when looking closer: Clinton’s task force also includes a special team that focuses on the Israeli-Palestinian issue, a permanent American headache that has worsened over the years. This team is also bad news for Netanyahu. Experts who were involved in the last administration are also included, such as Ilan Goldenberg, Tamara Coffman-Wittes, Derek Chollet, Prem Kumar and probably also David Makovsky. Most of these people are working at the moment as volunteers, but the direction is clear. If Clinton does become the next president of the United States, most of these people will take up key positions in her administration.

Clinton’s goal is simple: If and when she is elected, she hopes not to waste time on overlapping or studying past experience. She will pick up where she left off and hit the ground running. Nothing scares Netanyahu more than her ambitions, while his policy is to waste time. He banks on other political needs forcing the American president to avoid having to make real decisions. Netanyahu succeeded in teaching Obama a lesson in small-minded, devious politics. He actually managed to spend eight years with Obama without making a single significant decision or implementing a significant concession.

The last thing that Netanyahu wants is an American president who knows her stuff and has well-formulated opinions. Clinton is viewed as a supporter of Israel, but one that does not like Netanyahu. “We think that she won’t allow herself not to renew the diplomatic process between Israel and the Palestinians,” a source close to Netanyahu told Al-Monitor on condition of anonymity. This is bad news for the prime minister, who has succeeded in freezing the process and totally keeping it from the international agenda, at almost no cost to himself.

Clinton was secretary of state; she managed the contacts with Netanyahu and was party to the demand to freeze Israeli settlement construction in the West Bank. In retrospect, this emerged as one of the salient mistakes of the Obama administration in his first term of office. With regard to this aspect, Netanyahu has some faint hopes. “We believe that Clinton understands the enormity of the error of that [settlement construction] freeze,” said a senior diplomatic source, quoting words of another associate of Netanyahu who spoke to the premier. “Hopefully, she’ll draw the [correct] conclusions.”

Nevertheless, Netanyahu is aware of Clinton’s opinion of him, and his opinion of her is not much better. He understands that the burden of proof rests on him. In conversations with his close advisers, he complains openly and frequently about his bitter fate. “I only got Democratic presidents,” he once said to one of his associates, according to a diplomatic source who spoke to Al-Monitor on condition of anonymity. “I had Bill Clinton in my first term of office, and Barack Obama in my second, third and fourth terms. Now I’ll get Hillary Clinton.”

At the moment, Netanyahu is trying to prepare himself for the two poor alternatives he faces. If Clinton becomes the next president of the United States, Netanyahu will need to exploit all the political and personal talents at his disposal to win her over. In this context, a decisive role will most certainly be accorded to American-Israeli businessman Haim Saban, who is one of the Clintons’ closest associates. Saban keeps in touch with Netanyahu and served as mediator when needed between the Obama administration and Netanyahu in recent years. Saban will be a key player indeed.

Article Link to Al-Monitor:

Syrian Rebels Weigh In On Cease-Fire

Opposition fighters in Syria consider the cessation of hostilities 'negative,' although it has reduced civilian casualties.

May 5, 2016

ISTANBUL, Turkey — Before the Syrian regime launched an offensive in Aleppo in April, the "cessation of hostilities" that went into effect Feb. 27 had noticeably reduced civilian deaths although riven with violations. In the first five days alone, more than 180 violations of the agreement brokered by the United States and Russia were documented, and vast swaths of territory were excluded from the cease-fire. As of the end of 2015, the Syrian civil war had killed at least 470,000 people, according to some estimates, with the vast majority of civilian deaths caused by government attacks.

Islam Alloush, spokesperson for rebel faction Jaish al-Islam, told Al-Monitor in an interview in Istanbul that the cease-fire had been good for the country from the standpoint of lowering civilian deaths, but it had been "negative" militarily for the opposition forces.

"In the countryside of Damascus, in eastern Ghouta and Daraya, the regime never agreed to a cease-fire," said Alloush, who had been an officer in the Syrian military prior to joining Jaish al-Islam. "I think the regime got involved in the cease-fire to stop fighting in other areas in order to concentrate on these areas, given their strategic importance."

Ghouta was the site of the chemical weapons attacks on Aug. 21, 2013, that killed several hundred people. The eastern section has been under seige by government forces for more than three years.

Eastern Ghouta was subject to a 24-hour "regime of silence" that began April 30. According to an April 29 statement by Michael Ratney, the US envoy for Syria, the cease-fire was hashed out by the United States and Russia as part of a "recommitment" to the original cessation of hostilities. The same agreement called for a 72-hour cessation of hostilities further north, in the northwestern coastal province of Latakia. In light of the regime's ongoing bombing of Aleppo, 42 opposition factions reportedly signed a statement April 30 rejecting the regime of silence and all "regional truces."

In late March in southern Turkey, Mohammad Haj Ali, a major opposition leader in Latakia and commander of the Free Syrian Army's (FSA) First Coastal Division, had told Al-Monitor that the Russians, Syrian regime and allied forces had continued using ground troops, barrel bombs and artillery in Latakia's mountains, even after the cessation of hostilities went into effect and after Russia announced on March 15 that it was withdrawing some of its forces.

Haj Ali also said that his group, at that time operating primarily in Latakia against regime and allied troops, had nonetheless complied with the cease-fire. Rebel groups later launched an offensive in Latakia, on April 18. Haj Ali informed Al-Monitor in a message on May 1, "We could not progress, but we have maintained our areas."

In a subsequent exchange of messages, the FSA commander said there had been violent fighting in the hours leading up to the 72-hour regime of silence in villages in Jabal Akrad, where his men were fighting. Some of them died in the battle. Haj Ali added that some 30 men from the First Coastal Division had been killed since the cessation of hostilities went into effect and that another 50 had been injured.

Meanwhile, further complicating the situation on the ground was the growing conflict north of Aleppo between predominantly Sunni Arab opposition groups and the Kurdish-dominated, US-backed Syrian Democratic Forces (SDF), sometimes seen as regime collaborators and at other times as part of the opposition.

A leader of an FSA faction active north of Aleppo against the Islamic State (IS) to the east and the SDF to the west spoke to Al-Monitor on condition of anonymity during a brief stay in southern Turkey in April, prior to returning to combat. He said that the cease-fire was useless, stating, "We are still fighting the regime, in the form of the YPG [the Kurdish People's Protection Units]. It's the same thing." YPG fighters represent an overwhelming majority in the SDF.

Asking to be identified as Abu Osama, although known in Syria by a different name, the FSA leader said the Kurdish fighters were "doing the regime's work for it" by fighting opposition groups and taking territory from them.

In late April during battles between rebel fighters and the SDF in the northern city of Tel Rifaat, which the SDF had taken from opposition forces, Kurdish fighters paraded the corpses of opposition fighters through the city of Afrin.

In early April in a border town in southern Turkey, several members of the FSA's Fastaqim Kama Umurt faction, which mainly operates in Aleppo province, had told Al-Monitor that the cease-fire was not a good thing. When asked how it could be considered negative if it was saving civilian lives, one fighter, who requested anonymity, replied, "The fighters are losing the will to fight. It's been dragging on for years now. And our main goal of getting the criminal regime to fall needs to be focused on."

Ammar Selmo, former head of an Aleppo branch of the Syrian Civil Defense, told Al-Monitor on May 1 that in the preceding weeks, prior to the regime's renewed bombing campaign, "Life [had] returned to the streets and the markets." Peaceful street protests had also resumed in many opposition areas, such as Aleppo and Idlib, bothagainst the regime and against the more extremist armed groups of the opposition.

UN envoy Staffan de Mistura said on April 27 that the cease-fire was “barely alive,” especially after targeted attacks on hospitals and rescue workers in opposition areas killed large numbers of civilians in the preceding days. He urged Russia and the United States to work together to salvage the agreement. Russia replied on April 30 that it would not ask the Syrian regime to halt attacks on opposition-held Aleppo.

Days later, on May 2, US Secretary of State John Kerry spoke with foreign dignitaries in Geneva in an attempt to extend the cease-fire to Aleppo, and de Mistura traveled to Moscow May 3 to meet with Russian Foreign Minister Sergey Lavrov for the same purpose. On May 4, Washington and Moscow announced that they had "concluded arrangements" to extend the cessation of hostilities.

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Is Iran Lobby Pro-US or Pro-Putin?

By Michael Rubin
May 5, 2016

Earlier this year, Marcel H. Van Herpen, director of the Cicero Foundation, a think tank with branches in both Maastricht and Paris, published a comprehensive study entitled Putin’s Propaganda Machine: Soft Power and Russian Foreign Policy. It’s a timely work, well researched, well written, and comprehensive. And it certainly added greater context to Russia Today (RT), Russia’s flagship English-language network. He writes:

"From 2009 onward, the focus of Russia Today began to change. From a defensive soft-power weapon, RT began to develop as an offensive weapon…. Anchors of RT programs (such as Peter Lavelle) did not hide their explicit anti-American views. RT also started inviting representatives of marginal, often extreme right anti-government groups, who were presented as ‘experts.’ One of these groups was the so-called 9/11 truthers, people who believe that the 9/11 attacks were not the work of al-Qaeda terrorists but a US government conspiracy… Another group was the ‘birthers,’ people who doubted—against all evidence—that President Obama was born in the United States and denied that he was eligible to be US president… RT ‘experts’ also included Malik Zulu Shabazz, the leader of the New Black Panther Party, a hate group. Another invited pundit was Daniel Estulin, who considered the European Union to be the realization of a secret plan invented by the Bilderberg Group…. The same penchant for conspiracy theories was revealed in the RT program The Truth-seeker, which suggested the US government was behind the terrorist attack on the Boston Marathon in April 2013, in which two ethnic Chechen killed three people. Manuel Ochsenreiter, a guest speaker about German affairs on RT’s English-language channel, is actually the editor of the neo-Nazi magazine Zuerst!, a monthly radical-right magazine that…speaks out against ‘de-nazification.’"

What’s actually telling is how much the National Iranian American Council (NIAC), the de facto Islamic Republic of Iran lobby in the United States, has come to rely on RT to publicize itself during the same period in which RT had become an offensive propaganda weapon.

Here, for example, are just a few of the RT contributions of NIAC’s permanent leader, Trita Parsi. And here are similar conspiratorial inputs by Jamal Abdi, the group’s policy director who opined, for example, that a terrorist attack in Israel might actually be about providing a pretext for Israel to attack Iran. And here is Reza Marashi, who had started at the State Department as an intern and come to the attention of his bosses for his unnatural curiosity about the identities of democracy grant recipients inside Iran, passing himself off as “a former State Department officer” to purport to tell RT what U.S. intelligence agencies were saying.

Many organizations seek to chime in and seek to inform or shape the policy debate, but few would think it wise to make their case alongside 9/11 Truthers, Neo-Nazis, and other hate-groups. Then again to argue that the Islamic Republic of Iran is a normal state that has shed its ideology is to be just as divorced from reality. What is shocking, however, and more than a bit worrying is that those purporting to advance a relationship which they argue would be good for the United States think nothing of associating themselves with such conspiracy theorists or lending themselves as agents of Kremlin propaganda.

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Like It Or Not, The U.S. Is At War

By Max Boot
May 5, 2016

The death of a U.S. Navy SEAL in Iraq–Charles Keating IV–has exposed an interesting rift between the Department of Defense and the White House about what U.S. forces are doing there in the first place. Defense Secretary Ash Carter said forthrightly: “It is a combat death, of course. And a sad loss.” White House spokesman Josh Earnest, on the other hand, denied that Keating died in combat: “The relatively small number of U.S. service members that are involved in these operations are not in combat but are in a dangerous place,” he said.

Carter needs to be commended for honesty, while Earnest needs to be censured for being less than, well, fully earnest. Keating was apparently working with Kurdish peshmerga forces not far from Mosul when a flying column of ISIS fighters penetrated Kurdish lines and killed him along with others in an intense firefight. U.S. forces then responded with intense air strikes that were said to have killed more than 20 militants. How is this not combat? And how does Keating’s presence near the front lines not represent “boots on the ground”?

Only in the imagination of President Obama and his close aides can the U.S. mission in Iraq be said not to be a war. This kind of rhetorical legerdemain is not exactly new–recall that Truman called the Korean War a “police action”–but it is nevertheless disturbing on several levels. First the administration isn’t leveling with the American public. I am leery of overblown comparisons to Vietnam but it is fair recalling how both the Kennedy and Johnson administration sent troops into harm’s way while denying, at least until 1965, that they were doing so. That is not an example to emulate.

The second and more significant problem with what the administration is doing is that it is probably not leveling with itself. By pretending that U.S. forces aren’t in combat and that the United States is not committed to another war in Iraq, the president is able to tell himself that he is not repeating the same mistakes as his hated predecessor. But the cost of his intent to wage war without admitting that he is doing so is high: Not only in lost credibility but also in missing will.

George W. Bush made a lot of mistakes in Iraq, especially from 2003 to 2007, but the one thing he got right was that he always showed a steely determination to prevail. War is ultimately a test of wills, and if you are facing a determined and dangerous adversary, you had better have a strong desire to prevail. Bush had that. Obama doesn’t. It is plain that this president’s top priority is not to defeat ISIS, as he claims, but to avoid getting further entangled in Iraq.

That is the biggest weakness of the entire U.S. war effort. It helps to explain why we still don’t have adequate resources to battle ISIS and why we lack an adequate politico-military strategy in either Iraq or Syria. The chaos we are seeing in Baghdad is just one sign of how inadequate the U.S. approach has been; the Iraqi government of Haider al-Abadi, which Obama has backed to the hilt, is too busy dealing with internal dissension to focus effectively on the outside threat.

The buck stops in the Oval Office. President Obama doesn’t really deceive the American public or the wider world about what we are up to — everyone knows we are involved in a war — but he is deceiving himself if he thinks that he can fight and win without a serious commitment.

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