Tuesday, June 7, 2016

Tuesday, June 7, Night Wall Street Roundup: S&P Edges Closer To Record High; Energy Shares Lead

By Caroline Valetkevitch
Reuters
June 7, 2016

The S&P 500 ended at its best level since July on Tuesday, helped by a big jump in energy shares and investor confidence that higher interest rates will not derail the economy.

The index finished below its best levels of the session, though, while the Nasdaq ended lower. Biotech shares dropped following disappointing news from several key companies including Biogen. The Nasdaq Biotech Index .NBI was down 2.5 percent, its biggest daily percentage decline since May 11.

Giving the S&P 500 its biggest boost, the S&P energy index .SPNY jumped 2.1 percent as oil prices reached 2016 highs due to supply constraints and a weak dollar. Exxon Mobil (XOM.N) gained 1.5 percent to $90.71.

Gains this week have once again put the S&P 500 within striking distance of record highs reached in May 2015. Comments from Fed Chair Janet Yellen on Monday seemed to ease some worries about the economy, while underscoring views the Fed may be in no rush to raise rates.

"The big story for the market right now is, do we break out to all-time highs," said Michael Sheldon, chief investment officer at Northstar Wealth Partners in West Hartford, Connecticut.

"If we do so in the near term, we could see a rush of money jump into the market from investors who had been sitting out on the sidelines, in fear missing out on further market gains."

The Dow Jones industrial average .DJI ended up 17.95 points, or 0.1 percent, to 17,938.28, and earlier broke above 18,000, while the S&P 500 .SPX gained 2.72 points, or 0.13 percent, to 2,112.13, its highest close since July 22.

The benchmark index now sits less than 19 points from its all-time closing high of 2130.82.

The Nasdaq Composite .IXIC dipped 6.96 points, or 0.14 percent, to 4,961.75.

Navistar International (NAV.N) shares jumped 19.6 percent to $14.54 after it posted a surprise second-quarter profit.

On the downside, the S&P 500 healthcare index .SPXHC dropped 0.7 percent, dragged down by Biogen (BIIB.O) and Alexion (ALXN.O).

Biogen tumbled 12.8 percent to $252.86 after its multiple sclerosis drug failed in a mid-stage study.

Alexion dropped 10.9 percent to $138.13 after its drug failed a trial, while Valeant (VRX.N) slumped 14.6 percent to $24.64 after the drugmaker cut its full-year forecast.

About 6.4 billion shares changed hands on U.S. exchanges, below the 6.9 billion daily average for the past 20 trading days, according to Thomson Reuters data.

Advancing issues outnumbered declining ones on the NYSE by 1,896 to 1,136, for a 1.67-to-1 ratio on the upside; on the Nasdaq, 1,462 issues rose and 1,364 fell for a 1.07-to-1 ratio favoring advancers.

The S&P 500 posted 43 new 52-week highs and one new low; the Nasdaq recorded 82 new highs and 22 new lows.


Article Link to Reuters:

Oil Hits 2016 High On U.S. Draw Forecasts, Nigeria Worry

By Barani Krishnan
Reuters
June 7, 2016

Oil prices hit 2016 highs on Tuesday, with U.S. crude settling above $50 a barrel the first time in almost a year, on expectations of domestic stockpile draw and worries about global supply shortfalls from attacks on Nigeria's oil industry.

U.S. crude stockpiles likely fell by 2.7 million barrels last week to mark a third straight week of declines, an updated Reuters poll showed.[EIA/S]

Trade group American Petroleum Institute was expected to cite a drawdown as well in its inventory report due at 4:30 p.m. (2030 GMT), before official stockpiles data slated for Wednesday from the U.S. government.

Crude oil rallied in the past two sessions after rebels in Nigeria's Niger Delta vowed to halt output in the country, Africa's biggest producer until last year. The Nigerian government said it was initiating talks with the rebels.

"The market remains concerned about unscheduled supply interruptions with the latest coming from additional shut-ins in Nigeria," said Dominick Chirichella, senior partner at the Energy Management Institute in New York.

"With the industry projecting a decline in total U.S. crude oil stocks in this week's reports, the market bears are remaining on the sidelines."

U.S. crude's West Texas Intermediate (WTI) futures CLc1 settled up 67 cents, or 1.4 percent, at $50.36 a barrel. It was WTI's first settlement above $50 since July 2015. The session high was $50.53, a peak from October.

Brent crude futures LCOc1 settled up 89 cents, or 1.8 percent, at $51.44. It hit $51.53, also the highest since October.

Both Brent and WTI have almost doubled in value since winter, when they hit their lowest since 2003.

Prices bounced off those lows on talk of an OPEC production freeze, which did not materialize. The rally heightened after last month's wildfires in Canada's oil sands region and also has been supported by supply outages elsewhere, including Nigeria, Venezuela and Libya.

The U.S. Energy Information Administration said it expects crude production declines for 2016 and 2017 to remain unchanged from a month ago.

Production will fall by 830,000 bpd this year to 8.6 million bpd, and drop next year by 410,000 bpd to 8.19 million bpd, the agency said in its short-term energy outlook.

The EIA also raised its 2016 U.S. oil demand growth forecast.


Article Link to Reuters:

Republic Leadership Squirms Over Trump

By Richard Cowan and Steve Holland
Reuters
June 7, 2016

House Speaker Paul Ryan denounced as textbook racism Donald Trump's condemnation of a Mexican-American judge, slamming him as Republican Party leaders sought to distance themselves from their presidential nominee on Tuesday.

Trump's repeated insistence that U.S. District Judge Gonzalo Curiel is biased in a case involving him because he was born to Mexican parents threatened to disrupt Republicans' already difficult efforts to unite behind the candidate.

Ryan's emphatic rejection showed anxiety among party leaders about their ability to hang on to control of the U.S. Congress in the Nov. 8 election, if voters trounce Trump and also punish Republicans lower down on the ticket.

The issue also plunged the Trump campaign into disarray as his core supporters struggled to explain his remarks amid appeals from party leaders for Trump to apologize and move on.

Ryan, the top elected Republican, expressed misgivings last month about Trump after the real estate developer became the party's presumptive presidential nominee, but finally gave his endorsement last week.

Ryan was swarmed with reporters' questions on Tuesday about whether he had any remorse over the endorsement. Trump spent most of the past week denouncing Judge Curiel for keeping alive a lawsuit over Trump's defunct real estate training school. Trump said the judge was biased because of his heritage.

"I regret those comments that he made. Claiming a person can't do their job because of their race is sort of like the textbook definition of a racist comment. I think that should be absolutely disavowed," Ryan told reporters.

However, Ryan said he still supported Trump, adding a Trump presidency would be preferable to a White House occupied by Democrat Hillary Clinton, the likely Democratic nominee.

Ryan's counterpart in the Senate, Mitch McConnell, said Trump should stop attacking minority groups.

"My advice to our nominee is to start talking about the issues that the American people care about, and to start doing it now," the Senate Republican leader told reporters.

"In addition to that, it's time to quit attacking various people that you competed with or various minority groups in the country and get on message."

U.S. Senator Bob Corker of Tennessee, who is on Trump's short list of vice presidential candidates, told MSNBC's "Morning Joe" that Trump's campaign has reached "an inflection point" and he needed to move past the controversy.

"He has within his fingertips the opportunity to pivot, to move to the general election," he said.

During the Republican primary campaigns, in which Trump vanquished 16 opponents with a stream of insults to rivals and inflammatory comments about Muslims, immigrants and women, establishment Republicans squirmed over the prospect of the former reality television host becoming their standard bearer.

But many, seeing no other alternative, have since reconciled themselves to a Trump run for the White House.

Now, with Trump ignoring calls for a more policy-oriented campaign, McConnell and other high-profile Republicans are again trying to rein him in.

"We are trying to get in line, but he keeps taking the subject away from unifying the party," McConnell told Fox Business Network.

'Unfair Position'

Trump's continuing practice of making explosive remarks about racial, religious and gender issues is making Republicans, including those who have embraced him, uncomfortable.

“Trump just needs to throw everybody a lifeline here and back off what he said," Republican strategist Ryan Williams said. "He’s put his supporters in a very unfair position because they can’t defend what he said but they don’t want to undermine his candidacy."

Williams noted that Trump had been able to put behind him dust-ups during the early stages of the Republican primary contest, such as when he called Mexican immigrants rapists and urged a temporary ban on Muslims entering the country.

Now was different, Williams said. "He’s not been able to put this behind him. The traditional Trump strategy of simply doubling down and punching his way through a controversy doesn’t seem to be working this time around."

And with greater scrutiny of Trump now that he is set to formally win the Republican presidential nomination at the party's July convention in Cleveland, there are concerns about the party's continued hold on the House and Senate.

"Trump's continuing missteps, punctuated by his outrageous and indefensible comments about Judge Curiel, make that goal much more difficult to achieve," said Lanhee Chen, a senior adviser to former presidential candidate Marco Rubio and who is a senior fellow at the conservative Hoover Institution.

One prominent Republican rushed to Trump's defense on Tuesday.

New Jersey Governor Chris Christie, Trump’s former rival in the Republican race, said, ”Donald Trump is not a racist. The allegations that he is are absolutely contrary to every experience that I've had with him over the last 14 years.”

Christie has been mentioned as a potential vice presidential running mate with Trump.

Other Republicans heaped criticism on Trump.

In a New York Times interview, Senator Lindsey Graham, also a former presidential candidate, said Trump's remarks about Mexican-American and Muslim judges were "the most un-American thing from a politician since Joe McCarthy.”

Graham added, “If anybody was looking for an off-ramp, this is probably it,” in abandoning their support for Trump.


Article Link to Reuters:

Facebook Just Doesn’t Understand Free Speech

By Post Editorial Board
The New York Post
June 7, 2016

About the time Mark Zuckerberg was meeting with conservatives last month to tell them Facebook doesn’t suppress their views, Facebook was suspending the account of UC San Diego student Carlos Flores for . . . expressing conservative views.

A friend had posted about the trans “bathroom” wars, lamenting society’s loss of clear sexual-identity lines. Flores commented: “Better to be ‘transphobic’ than reality-phobic. The truth is that no amount of scalpel cuts, dresses or wings can make a man a woman. All it can do is make him look like a woman.”

Blam! Facebook told him it had removed his post because it didn’t “follow the Facebook Community standards” and was blocking him from posting for 24 hours.

When the block ended, Flores posted: “I am returning from a 24-hour ban from FB. Apparently Comrade Zuckerberg does not tolerate the inconvenient truth that no amount of scalpel cuts can make a man a woman.”

That got him a three-day ban, which might have been worse if Facebook weren’t facing other PR problems over its bias.

Flores isn’t alone; this seems to be standard Facebook practice. “Community standards” translates to “our speech or no speech.”

And the kings of new media don’t really understand why that’s a problem.


Article Link to the New York Post:

Republicans Have Crippled The Supreme Court

Missing deadlines, making mistakes, and leaving key questions unanswered – America's highest court is under severe strain because the GOP refuses to even grant a hearing to nominee Merrick Garland.


By Jay Michaelson
The Daily Beast
June 7, 2016

This is what a broken Supreme Court looks like.

Three weeks before the official end of the 2015-16 term, there are 22 cases still outstanding. On Monday, with several high profile cases eagerly anticipated by court-watchers, the Court only announced two relatively minor opinions. It looks likely that the Court will need to extend its own deadline.

And then, on the same day, the bizarre news that, Oops, one of the two issues the Court said it would hear in a death penalty case next fall – it won’t actually hear. Never mind!

That kind of sloppiness is rare. On the merits, it’s not that important, but procedurally, it’s a highly unusual screw-up.

It’s impossible not to see these events in the context of a short-handed Court, now four months without its full complement of judges, doing its best to stay on top of things. And not always succeeding. All of this, of course, is due to the completely unprecedented stonewalling by Senate Republicans of a perfectly qualified candidate to fill that vacancy.

In recent weeks, there have also been more subtle, but more destructive, consequences of the Senate’s oath-breaking, Constitution-scorning inaction.

Last week, the liberal advocacy organization People for the American Way published a report analyzing the effects of two tie decisions that have come down since February. In one, the Court left in place a split between the Sixth and the Eighth Circuits regarding spousal guarantees for bank loans. Despite all the resources invested in resolving this legal issue, federal law now remains uneven; requiring such guarantees is legal in some circuits, illegal in others. To be sure, bank loan guarantees is not a high-profile issue, but it is one that affects thousands of people every year.

More politically charged was the Frierichs case, which the Court left unresolved on March 29. That case was about whether public-sector unions could require non-union employees to pay a “fair share fee” to pay for collective bargaining and other costs. Without such fees, progressives argue, the unions might go out of business, ultimately hurting employees. With them, conservatives complain, they compel public employees to effectively join a union and support its political activities; that violates the First Amendment.

Who’s right? The Court was deadlocked, so we don’t know the answer.

Then there are the cases like Zubik v. Burwell, in which the Court, rather than decide a contentious issue about religious exemptions and Obamacare, proposed and ordered its own makeshift compromise, resolving the particular dispute but leaving key questions unresolved about religious exemptions, which is driving controversies in North Carolina, Texas, Tennessee, Indiana, and around the country.

It’s also quite possible the Court will either deadlock or punt on some of the major cases remaining this term, including Whole Women’s Health, a case about Texas’s abortion restrictions. Assuming Justice Kennedy votes to uphold the regulations, that will place the Court in a 4-4 split, and leave the Fifth Circuit’s decision – which mostly upheld the restrictive rules – in place.

But here’s where it gets even more complicated. Last June, the Supreme Court placed an injunction on enforcement of the law, pending the outcome of the case. So what happens if the Court deadlocks? Is that an “outcome,” or no outcome at all?

Functionally speaking, allowing the Fifth Circuit opinion to stand means the Texas law is Constitutional. And that, according to experts, would require the majority of abortion clinics in Texas to close. A 4-4 decision may sound like a tie, but there’s no tie when it comes to those clinics, and the women who use them. They’re either open or they’re closed – and it’s not at all clear why one side should prevail in a tie.

Worst of all, this supreme dysfunction may become the new normal. As Laurence Tribe and Joshua Matz wrote recently in the Washington Post, it’s quite plausible that confirmation stonewalling will become commonplace anytime there is divided government in Washington. It’s not as if the Democrats are just going to forgive and forget – they’ll fight fire with fire. (This, incidentally, is one of many reasons Fred Barnes’s ludicrous celebration of the anti-Garland stonewall was so myopic.)

And it’s not even just the Supreme Court; as we reported earlier, the Republican-created “judicial emergency” extends to lower courts as well, with a record number of vacancies going unfilled. Mainstream GOP leaders may be criticizing Donald Trump for attacking a Mexican-American judge, but they are attacking the entire judicial system.

So this is what a broken Supreme Court looks like: behind schedule, making careless mistakes, deadlocking, contorting itself to achieve consensus, and sometimes failing to fulfill its Constitutional responsibility to maintain the rule of law. Senate Republicans have acted like the Garland stonewall presents just a small inconvenience in the service of “letting the people decide.” But in fact, it is a full-on fiasco. Its only positive outcome would be the generation of enough rage to throw the bastards out.

Several years ago, a judge wrote that when, as in cases of recusal, “The Court proceeds with eight Justices,” it “rais[es] the possibility that, by reason of a tie vote, it will find itself unable to resolve the significant legal issue presented by the case” and “impairs the functioning of the Court.”

That judge was Justice Antonin Scalia.


Article Link to The Daily Beast:

Dissent Is A Dirty Word For Trump

By Jonathan S. Tobin
Commentary 
June 6, 2016

From the start, the Donald Trump campaign has been something of a one-man band. But in the last few days, we’ve seen just how much a lone wolf Trump has become. While it was not surprising that some of the mainstream Republicans that had been reluctantly dragged into supporting the presumptive GOP nominee would seek to distance themselves from his racist attacks on Judge Alonzo Curiel, one of his most faithful supporters in recent months has now also condemned his comments.

Trump’s repeated charge that the judge presiding over the Trump University fraud case couldn’t be fair because he was a “Mexican” led former House Speaker Newt Gingrich to declare this to be not only a “mistake” but “inexcusable.” Gingrich is, of course, right, and he deserves some credit for saying so after several weeks of dedicated shilling for Trump. But his apostasy, which earned him a quick and severe reproach from the Republican standard-bearer, raises some interesting questions not only about life in Trump World but how Trump’s increasing isolation will affect his decisions as a candidate and as president should he be elected.

In taking Trump to task for his obsessive smears of Judge Curiel, Gingrich was careful not to leave the impression that he had abandoned his candidate. He did not call Trump’s statements as racist and praised him as a “remarkable leader” who is a “fast learner” and spoke of their “good relationship.” He also insisted that he would back him against the “much more flawed” Hillary Clinton “all year.”

But that wasn’t enough to spare him from a rebuke from the GOP’s new Dear Leader. Trump’s reaction betrayed not only his legendary thin skin but also a well-known rule about entry into his inner circle: Trump must always be supported and praised. That’s why he didn’t merely disagree with Gingrich but stated that his comments were “inappropriate.” Of course, it’s somewhat humorous for a man for whom propriety is a dirty word to criticize someone with that term, but, in Trump World, there is only one code by which one must abide: loyalty to the Donald, first, last, always.

To be fair, Trump isn’t the only leader to have such a rule. Though the man he is seeking to replace in the White House can act publicly with far more grace than Trump, his is an administration where entry in the inner circle requires not merely loyalty but a determination never to disagree with Obama. His has been a top-down administration in every way and anyone who dissents from his rulings must either pipe down and be a cipher (which is the best way to characterize Hillary Clinton’s four years as secretary of state) or resign.

The analogy to the president’s management style is no compliment to Trump. But the difference is that Obama had, from the beginnings of his candidacy in 2007, assembled a large, loyal, and devastatingly efficient team to serve him and was able to stay on message throughout both of his campaigns for the presidency. By contrast, the disorganization in Team Trump is no secret. Nor is the fact that more than a month after he clinched the Republican nomination, it is still woefully understaffed and unprepared to deal with crises or opportunities. But that is to be expected. Obama ruled over a campaign machine with a heavy hand, but he never put his people to the test the way Trump has, given his impulse to constantly go off message and to indulge his worst instincts as he vents anger and frustration at all who will not bow to his will.

Gingrich says this is a “turning point,” which should teach Trump to start listening to advice from cooler, wiser heads and to stop going off message. But as Trump has shown us again and again, even if he thought such a switch would be wise, which he doesn’t, he just doesn’t want to change. The fact that he dug himself deeper into this controversy by claiming a Muslim judge would be equally unfair made it obvious that the candidate isn’t listening to such advice.

As such, this will probably mean that Gingrich is crossed off his short list for the ice presidential nomination and could now be frozen out of Trump’s inner circle. Senator Bob Corker, who has also been sucking up to Trump relentlessly in recent weeks didn’t go as far as Gingrich but still spoke yesterday about him having to change and not being willing to “condone” the comments about the judge. Will he too be voted off of Trump Island for criticizing its king? It’s hard to say, but if Trump is going to limit his choice to those who have not spoken out against his racist rants, it will narrow down the options considerably.

Trump’s refusal to stop abusing the judge on racial/ethnic grounds for refusing to dismiss the fraud case against him has given us a window into his character. As we should have already learned, there are no limits to what Trump will say to besmirch the character or the conduct of anyone who criticizes or thwarts him in any way. If it means outright lying or disingenuously circulating false stories or playing the race card, he will do it and think himself justified because anyone who is not with Trump is deserving of being slandered and/or crushed.

This also tells us a lot about how a President Trump will govern.

We’ve seen under Obama how a White House whose animating principle is the glorification of one man and his ideas operates. Obama has given us a good, long look at how little the rule of law can mean to a president who thinks himself the sole judge of what is right and justified in making end runs around Congress and the Constitution when he is thwarted. With Trump, we would likely get more of the same with the sole difference that personal vendettas may become the primary focus of an imperial presidency rather than just a sidebar to the demands of a left-wing ideologue in the manner of Obama.

The Obama White House has operated much like his presidential campaigns with ruthless efficiency and message control creating echo chambers with an acquiescent press corps in order to push through unpopular and dangerous ideas like ObamaCare and the Iran nuclear deal. But with Trump, we’d get the same president worship without the discipline and control. His administration would also center on the whims of one man but have an added layer of palace intrigue and viciousness, as his mercurial personality would make the presidency hostage to his moods, whims, and an ever-expanding personal enemies list. Imagine the paranoia and rage of Richard Nixon mixed with the hubris of Obama and that might be what awaits us unless Trump does undergo a magical transformation in the next few months.

Republicans do well to point to the dismal prospect of another Clinton presidency, in which an integrity and truth-challenged leader also operated in a different kind of echo chamber where she, too, rages against enemies that she always imagines are conspiring against her. Yet as long as Donald Trump continues to go off message and to make his own character and troubling attitudes toward race and religion become the story of the day, Hillary Clinton’s shortcomings will not loom quite as large in the public imagination, as perhaps they should. The Sunday talk shows might have centered on Clinton’s woes but, instead, those stories were drowned out by Trump’s rants. But by speaking out now, Gingrich’s heresy may provide us with an interesting test case about Trump as well as one that will give us a clue about his chances of adapting to the needs of the general election. Unless Trump World becomes a more conventional campaign with a candidate who can learn to keep his mouth shut when he feels the impulse to make racial comments and is ready to listen to loyalists like Gingrich rather than to freeze them out, we may never get to see if the fears of both Democrats and Republicans about the nature of a Trump presidency will be realized.


Article Link to Commentary:

'Fix' The U.S. Political System At Your Own Risk

By Albert R. Hunt
The Bloomberg View
June 7, 2016

It's rare that President Barack Obama and Republican National Committee Chairman Reince Priebus agree. In recent weeks, they both have said that the presidential nominating process is not rigged.

They are right. That hasn't stopped those displeased with the results -- establishment Republicans and Democrats who support Senator Bernie Sanders -- from insisting on changing the rules for the next election.

Some tweaks are always in order, but both sides are trying to craft procedures that would have worked to their benefit this time. Like generals fighting the last war, experience shows this rarely works and often backfires.

"Every time someone tries to game out this system" says Benjamin Ginsberg, the leading Republican election lawyer, "the great law of unintended consequences rears its head."

For the 2016 elections, Republicans wanted to compress the initial primaries and limit debates so that an establishment favorite -- Jeb Bush for most --- could wrap up the nomination early. Concurrently, conservatives insisted on the early Southern contests -- what became known as the SEC primary -- to better ensure victory for an ideologically suitable candidate.

The result was that the debates and calendar helped nominate the most non-conservative candidate in ages: Donald J. Trump.

Democrats changed the rules after their 1968 debacle to take control away from party bosses. That helped George McGovern win the 1972 nomination --- he then lost in a landslide to Richard Nixon -- and in 1976, paved the way for former Georgia Governor Jimmy Carter, not a favorite of the reform crowd.

The legitimate tension in the current debate is between those who want to empower the political parties, which often are stabilizing institutions for governance, and giving more say to voters. This friction goes back more than a century, as chronicled in Geoffrey Cowan's "Let the People Rule," about Theodore Roosevelt's 1912 effort to topple an incumbent Republican president and the party establishment. That marked the beginning of presidential primaries; it also made clear that the courts give broad discretion to the political parties to set their rules (to the discomfort then of T.R.).

In today's debate, there are two overriding issues for both parties: The role, or existence of superdelegates, or elected officials who automatically have status as convention delegates and aren't bound to any candidate; and whether primaries should be open to all voters or limited to members of the party. These two laudable concerns present an inherent conflict.

Sanders raises objections to the Democratic superdelegates, most of whom are supporting Hillary Clinton, though it's worth noting that his chief strategist, Tad Devine, wrote a 2008 column defending the concept. Some conservative Republicans, such as Senator Ted Cruz, who finished second to Trump, as well as some Democrats, argue for closed primaries so that independents and others can't game their contests.

There should be a sensible middle ground. Both parties should have superdelegates: at a minimum, all their members of Congress, governors and state party chairs. These are politicians that a president deals with and their inclusion is good for subsequent governance. And it's much better for Democrats and Republicans to hold primaries open to all voters to increase participation and enthusiasm, as Trump and Sanders did this time.

There also are moves to change the early primary and caucus schedules. One essential element is to maintain the first primary in New Hampshire, where an involved citizenry has forced candidates to spend time and answer questions from real voters for more than 60 years. Some of the outcomes have been outliers, but the Granite State primary embodies retail politics at its best.

Before the contests in California and New Jersey this week, the preferences of voters are clear. Clinton has gotten almost 13 million votes, or 3 million more than Sanders. Trump has racked up 11.5 million, or 4 million more than Cruz.

Those who protest that the system is rigged are reminiscent of former Georgia Governor Lester Maddox, who once said that the problem with his state's prisons was that they needed a better class of inmates.

Similarly, the solution for critics of the presidential system today would be a better class of voter.


Article Link to the Bloomberg View:

How NATO Planned To Win World War Three in Europe

The high cost of stopping the Soviets.


By Kyle Mizokami
The National Interest
June 6, 2016

The North Atlantic Treaty Organization (NATO) was formed in 1949 to oppose Soviet expansionism in Western Europe. The end of the war saw the Soviet Union solidify its gains in Eastern Europe, garrisoning countries such as Poland, Hungary, Czechoslovakia, Romania, Bulgaria and East Germany. NATO was a direct response to the raising of what Winston Churchill deemed the “Iron Curtain.”

At the time, American and Western European planners felt that if war were to break out between West and Stalin’s Russia, it would quite logically take place in Europe. The reality of nuclear weapons, however, meant that the two sides avoided direct confrontation and instead fought a series of proxy wars worldwide. That having been said, for the Soviet Union an invasion of Western Europe carried the biggest risk—and the biggest reward.

NATO’s strategic mission was to prevent the destruction of the alliance by military force. Essential to that were four wartime goals: gaining air superiority, keeping sea lines of communication open to North America, maintaining the territorial integrity of West Germany and avoiding the use of nuclear weapons. Were NATO to lose any of these four, the war was as good as over.

In 1988, NATO’s plan for the defense of Western Europe was the doctrine of forward defense, in which Soviet and Warsaw Pact forces were stopped as far close to the inner German border as possible. A defense in depth—which experience on the Eastern Front in World War II had proved superior—would have imperiled virtually the entire West German population and forty years of postwar rebuilding.

NATO seemingly had no unified battle plan other than to “man the line” until Soviet and Warsaw Pact forces were exhausted—whereupon counterattacks could be executed to restore prewar borders. West German Army forces, inflexible at the strategic level, were allowed a level of flexibility at the tactical level. The United States devised AirLand Battle, a doctrine that stipulated ground and air units would work together to strike the enemy simultaneously, from the forward edge of the battle area to deep behind enemy lines.

At sea, the primary mission of NATO’s naval forces was to keep the sea lanes between North America and Europe open, in order to guarantee the flow of reinforcements from the United States and Canada. NATO patrol aircraft, ships and submarines would seek out Soviet submarines attempting to interdict supply convoys, trying to keep them north of an imaginary line connecting Greenland, Iceland and the United Kingdom.

In the Norwegian Sea, the U.S. Navy planned to surge two to three carrier battle groups, plus a battleship surface action group to attack Soviet air and naval bases of the Northern Fleet. This direct attack on the Soviet homeland was meant to divert enemy attention from the convoys, destroy air and naval facilities, and starve enemy units at sea of support. It would also, unofficially, isolate Soviet ballistic missile submarines from their land-based support, leaving them in a position to be hunted down.

NATO naval forces would bottle up Soviet, Polish and East German naval forces inside the Baltic Sea, and prevent a seaborne invasion of Denmark. West German naval forces would be on alert for Polish marine units attempting to execute a landing north of Hamburg.

In the air, NATO’s air fleets would be assigned to several roles. American F-15s and F-16s, British Tornado ADV, and German F-4 Phantom jets, among many others, would attempt to establish air superiority over the continent. Meanwhile, British and German Tornado IDS low-level strike bombers would fly counter-air missions, bombing Warsaw Pact airfields in East Germany and Poland. USAF F-111 fighter bombers and other alliance strike jets would perform interdiction missions, bombing bridges, headquarters, supply and other targets to slow the Warsaw Pact advance. Finally, American A-10 Warthogs, German Alpha Jets and Royal Air Force Harriers would be providing forward air support to beleaguered NATO ground troops.

Yet it was on the ground was where the war would have been decided. Everything supported the war on the ground—even the air war, for the ideal Soviet solution to NATO air superiority was to put a tank on every enemy airfield.

Technologically, NATO ground forces had an edge, and the decade was a period where many combat systems were introduced that are still in service today. In 1988, the Europe-based U.S. Seventh Army was several years into fielding its “Big Five” combat systems: the M1 Abrams tank, M2 Bradley infantry fighting vehicle, AH-64 Apache attack helicopter, UH-60 Blackhawk transport and Patriot air defense missile, which would greatly upgrade the Army’s ability to fight AirLand Battle. West Germany had begun deploying its second generation tank, the Leopard II, also being deployed by the Netherlands, and had the Marder infantry combat vehicle. At the same time, the introduction of the Challenger tank and Warrior infantry fighting vehicle reinvigorated the British Army of the Rhine’s combat formations.

NORTHAG, or Northern Army Group, was assigned to the north half of West Germany. NORTHAG was committed to defending the North German Plain, a stretch of relatively flat, rolling country from the inner German border to the Netherlands and Belgium. The terrain clearly favored the attacker. NORTHAG also had the added pressure of protecting the shortest route to the Ruhr, the industrial heartland of West Germany, the West German capital of Bonn, and the shortest routes to Antwerp and Rotterdam, two major ports that played an essential role in flowing reinforcements to NATO.

NATO forces in sector were split between German, British, Dutch and Belgian corps of two to four combat divisions each—meaning it enjoyed unity of command only at the army level. Although NATO could expect quick reinforcement from the UK, the Netherlands and Belgium, most units in the army group’s sector were stationed far from their defensive positions and required extended warning to occupy them.

CENTAG, or Central Army Group, was assigned to the lower half of Germany. CENTAG was a predominantly German and American force, with a mechanized brigade from Canada added for good measure. Two German corps, each with a mix of panzer, panzergrenadier and mountain divisions, would hold the line, as well as two American corps, each consisting of two to three armored and mechanized infantry divisions. CENTAG was responsible for the narrowest point between the German border and the Rhine river, a distance of roughly 120 miles.

Although outnumbered, CENTAG had aces up its sleeve. U.S. and German combat formations were made up of armor and mechanized infantry, ideal for fighting the tank-heavy Soviet and Warsaw Pact forces facing them. Although a conscript army the Bundeswehr, as the West German army was called, was of very high quality, with excellent training, leadership and equipment. American divisions stationed in Europe had an extra maneuver battalion, increasing firepower by approximately 10 percent, and each American corps had an armored cavalry regiment screening the border.

Another plus for CENTAG was the terrain. Unlike northern Germany, the terrain in southern Germany consist of hills, mountains and connecting valleys, all of which strongly favored the defender. It was in CENTAG that the famous Fulda Gap was located, as well as the lesser-known Hof Gap and nearby Cheb Approach.

In the far north, Norway’s shared border with the Soviet Union seemingly boded ill for its defense. The mountainous terrain of Norway, however, made at an attack difficult to sustain, and any Soviet ground assault would have likely been assisted by Soviet marine and airmobile forces. NATO planned to send a multinational brigade, ACE Mobile Force, to buttress Norwegian defenses, and the U.S. Marine Corps prepositioned an entire brigade’s worth of equipment in Norwegian caves.

Across the continent, NATO could expect enemy airborne landings, helicopter-borne air assaults and attacks by special forces. These light and highly mobile formations would be used to seize key objectives behind NATO lines including airfields, bridges (especially over the Rhine, Main and Weser rivers), headquarters, supply depots and pre-positioned stocks of American equipment.

Guarding against these attacks and providing rear-area security were twelve brigade-sized units of West German reservists. Bonn also had three brigades of paratroops that could be quickly rushed to defend threatened areas. Air base security in NATO was very high, with the U.S. Air Force deploying large numbers of security troops at its many bases and the RAF Regiment guarding British airfields.

If conventional forces failed to stop a Warsaw Pact invasion, NATO had a wide variety of tactical nuclear weapons on hand, from nuclear depth charges to gravity bombs and the Ground-Launched Cruise Missile and Pershing II missiles. While the alliance certainly had enough nuclear weapons to stop a Soviet-led attack, using them would have started a cycle of nuclear retaliation and counter-retaliation difficult to stop. The use of tactical nuclear weapons would likely have begotten the use of strategic nuclear weapons . . . and the end of human civilization.


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Are The Taliban And Iran Teaming Up To Stop ISIS?

An article on the Jahan news website reported that the former Taliban leader who was killed in a US drone strike in Pakistan had met with Iranian officials one week before he was killed.


By Arash Karami
Al-Monitor
June 7, 2016

An article on hard-line Iranian news website Jahan has confirmed for the first time that the recently killed Afghan Taliban leader Mullah Akhtar Mohammad Mansour was in Iran before he was killed May 21. While Iranian media had previously confirmed meetings with Taliban officials, the article shows a deeper strategic shift in Iran toward a group it previously helped topple in order to counter the rising threat of the Islamic State (IS) on its eastern border.

According to the article, Mansour was in Iran one week before he was killed by a US drone strike in Pakistan’s Baluchistan province. Mansour had reportedly spent two months in Iran and conducted “various negotiations with different organizations and institutions.”

Jahan reported that one of the agreements between Iran and Mansour was “the prevention of Taliban bodies from joining [IS].” Iran and Mansour had also reportedly agreed to prevent the spread of IS influence in northern Afghanistan and on the Afghan-Tajikistan border. There had also been agreements to counter drug smuggling. A large percentage of Afghanistan’s opium production is either consumed in Iran or travels through Iran to its final destination in Europe.

The article reported that “there is no specific information” on how Mansour was targeted and denied reports that Iran was somehow involved. The article rather speculated that Mansour’s “semi-independence” from Pakistan could have displeased some members of its spy agency, the Inter-Services Intelligence, and they may have given Mansour’s location to the United States.

Jahan’s motivation for publishing the article and revealing previously unconfirmed information cannot be known. Political motivations or even disinformation should not be ruled out. However, it is a startling admission given the history between Iran and the Taliban.

Iran has historically been the main sponsor of the Taliban’s previous domestic rival, the Northern Alliance. In 1998, Iran nearly went to war against the Taliban government after their diplomats were killed in Mazar-i Sharif, Afghanistan. Iran had even offered assistance in the overthrow of the Taliban during the 2001 US invasion. Iran also has a positive relationship with Afghanistan’s central government, recently inking a trilateral transit route with the country.

But the rise of IS on both sides of Iran’s borders has turned a strategic rival into a tactical ally. A former official in the Barack Obama administration told Al-Monitor correspondent Barbara Slavin that Iran’s “estimate of the threat of [IS] in Afghanistan is higher than that of the United States.”

This tactical relationship is still far from being open or confirmed by Iranian officials. After Mansour was killed, anonymous US and European officials told the Western press that Mansour was in Iran possibly for medical reasons, to visit his family or to meet with Iranian officials. At that time, Iran’s Foreign Ministry Spokesman Hossein Jaberi Ansari said, “The officials of the Islamic Republic of Iran deny that such a person on such a date entered Pakistan from Iran’s borders.” Either Ansari was not in the know or he was intentionally deceptive over the fact that Mansour was traveling under a forged Pakistani passport under the name of Mohammad Wali.

Iranian media had previously reported on meetings with Taliban officials, though revealed less information on the content of the meetings. In May 2015, it was reported that a Taliban delegation from the group’s political office in Qatar had traveled to Tehran. Tayyeb Agha, who was the head of the Taliban’s political wing in Qatar when the visit took place, reportedly led the delegation’s meeting with Iranian security officials. Tasnim News Agency, which broke that story, wrote that Taliban officials had previously visited Iran on two occasions to meet with security officials and for an Islamic conference in Tehran.


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Are The Taliban And Iran Teaming Up To Stop ISIS?

How NATO Really Provoked Putin

By Lucian Kim
Reuters
June 7, 2016

Poland is about to host the largest multinational military exercises on its territory in more than a decade. The “Anakonda-16” exercises, involving 31,000 troops from more than 20 countries, are intended to showcase the North Atlantic Treaty Organization’s unity and speed one month before the alliance’s summit in Warsaw. The U.S. Army will play a key role, with a mechanized regiment based in Germany simulating a mission to rescue the Baltic states from a Russian attack.

The exercises come just weeks after the United States inaugurated the first of two controversial missile-defense installations in Eastern Europe. Next year, the Pentagon plans to quadruple military spending in Europe to $3.4 billion and begin rotating an armored brigade through Eastern Europe — in addition to extra NATO forces to be deployed to Poland and the Baltics.

The Kremlin’s response to Anakonda-16 is predictable. Russian President Vladimir Putin has already threatened Romania for participating in the U.S. missile shield. The large-scale maneuvers will only fuel the Kremlin narrative that Russia is being encircled by hostile forces. European peaceniks, too, won’t have to look far for new evidence of American war-mongering.

The escalating standoff resembles the chicken-egg conundrum. NATO argues that a return to containment and deterrence is the regrettable result of Putin’s 2014 attack on Ukraine. The Kremlin and its apologists answer that military intervention was necessary to forestall the U.S.-led alliance’s inexorable eastward encroachment. All debates over the Ukraine conflict start and end with NATO’s role.

In the case of Ukraine, NATO is a red herring. The former Soviet republic was never under serious consideration for membership, and barely a fifth of Ukrainians supported joining the alliance in polls taken before the Russian invasion.

NATO actually bowed to the Kremlin when Germany and France blocked a straight path to membership for Georgia and Ukraine in 2008. Months later, Russia occupied two breakaway regions in Georgia in a prelude to the annexation of Crimea and the creation of two puppet states in eastern Ukraine. To be accepted into NATO, an applicant country may not have any outstanding territorial disputes.

It’s easy to forget that it was reunified Germany that initially pushed for NATO enlargement after the collapse of the Soviet Union in 1991. Far from being a diabolical Pentagon plot, the issue was hotly debated on both sides of the Atlantic. Although dismayed by Western triumphalism after the Cold War, former Soviet leader Mikhail Gorbachev called it a “myth” that Western leaders had promised not to enlarge NATO.

After being situated on the Cold War frontline for more than four decades, Germans were eager to extend the NATO security bubble as far east as possible. The West was operating on the naive assumption that Russia had a shared interest in seeing the newly independent countries of Eastern Europe turn into stable, flourishing democracies. In fact, the Kremlin — even before Putin — preferred a buffer zone of weak, divided kleptocracies that had no chance of joining Western institutions or serving as an example for Russia.

“Expansion” is not the best word to describe NATO’s enlargement because it implies that the 12 Eastern European nations who have joined since 1999 were somehow passively involved. Having been trapped in the Soviet sphere of influence after World War Two, Poles, Lithuanians, Czechs, and Hungarians went for the best insurance policy around. Ultimately the decision to join NATO was taken by sovereign, democratic states incapable of defending themselves but for whom neutrality was not an option.

Moscow is not doomed to antagonism with the West. Russia has allied itself with Western European powers for more than two centuries. As he was running for his first presidential term in 2000, Putin said that he neither viewed NATO as an enemy, nor would he rule out joining the alliance — as an equal. Those last three words are key to understanding his anger with NATO today.

From the Kremlin’s point of view, it’s infinitely worse to be ignored than to be considered a worthy rival. Unfortunately, Putin’s rise coincided with the presidency of George W. Bush, who ran roughshod over the sensibilities of friend and foe alike. Putin’s outreach was rebuffed. In the face of Bush’s militant unilateralism, Moscow’s membership in the United Nations Security Council, the Group of Eight and the NATO-Russia Council proved useless.

Bush’s interest in Eastern Europe was primarily to reward nations that had participated in his “coalition of the willing” during the war in Iraq by bestowing NATO membership or promising to base elements of a planned U.S. system to shoot down missiles originating in the Middle East.

When President Barack Obama took office in 2009, he first had to dig himself out of the rubble of Bush’s disastrous foreign policy. The new president declared a “reset” in relations with Russia and froze missile defense plans for Eastern Europe, arguably the most contentious issue between Washington and Moscow.

In the end, Obama approved a pared-down version of the Bush missile shield because it would have been politically difficult to abandon a project involving Eastern European allies. Although the laws of physics prohibit the new installations from targeting Russia’s strategic nuclear weapons, missile defense serves the Kremlin well as an example of NATO encirclement.

Obama originally wanted to cooperate with Putin on issues of common concern and continue to ignore him wherever else possible. The American president failed to appreciate the post-imperial phantom pains still plaguing Russia.

When Obama spoke about a future without nuclear weapons, Putin heard him say Russia should be stripped of its only credible deterrent. When the White House pivoted to Asia and withdrew the last U.S. tank from Germany in 2013, the Kremlin saw it as waning American commitment to Europe.

Putin’s lightning occupation of Crimea and manufactured insurrection in eastern Ukraine took NATO by surprise. Even if Eastern Europeans remained wary of Moscow’s intentions, the rest of the alliance had come to view Russia as a grumpy neighbor rather than a stealthy adversary.

NATO’s efforts to reassure eastern allies with rotational forces from the United States or Germany are a crucial first step to restoring balance in Europe. But missile defense is a political football that poses no real threat to Russia. Eastern Europeans are using it to get U.S. boots on the ground, while the Kremlin can raise it as the hobgoblin of encirclement.

The United States may have provoked Putin through ignorance, arrogance or negligence — but not belligerence. That’s why NATO is in such a mad scramble to catch up.


Article Link to Reuters:

Tuesday, June 7, Morning Global Market Roundup: Asia Stocks Rise, Dollar Eases As Yellen Green-Lights Risk

By Saikat Chatterjee
Reuters
June 7, 2016

Asian stocks rose to a five-week high on Tuesday after U.S. Federal Reserve Chair Janet Yellen gave a largely upbeat assessment of the U.S. economic outlook, while the dollar declined on easing expectations of interest rate increases in coming months.

Financial spreadbetters predicted Britain's FTSE 100 would open down 0.10 percent, Germany's DAX to gain 0.15 percent, and France's CAC 40 to open flat.

MSCI's broadest index of Asia-Pacific shares outside Japan rose more than 1 percent, taking its gains to 6 percent in two weeks, as investors judged the Fed's cautious stance as well-suited to equities.

In Asia, Hong Kong led regional stock markets, rising 1 percent as investors hunted for bargains in one of the cheapest equity markets in the region.

Japan's Nikkei ended up 0.6 percent as attention turned to whether the Bank of Japan will ease policy again next week, as strength in the yen crimps the economy.

"Yellen's comments yesterday downplayed the impact of the jobs data last week and gave a cautious sense of optimism on the outlook for the U.S. economy," said Fan Cheuk Wan, head of Asia investment strategy at HSBC Private Bank.

"Her comments point towards the world remaining stuck in a low-growth and low-yield environment which should be positive for risky assets and keep the dollar soft," she said.

The Fed chief said last month's jobs report was "disappointing" but warned against attaching too much significance to the payrolls data in isolation.

Still, Yellen was careful not to give any hints about the timing of a next rate increase, in contrast to a speech on May 27, when she said such a move would probably be appropriate "in coming months."

World markets cheered her comments, with U.S. stocks closing a shade below a recent record.

Money market futures reduced bets on a July rate hike further, to around 20 percent, from 30 percent before Yellen's comments. They were pricing in about a 60 percent chance of a rate hike by July before Friday's weak payrolls data.

With the Fed suggesting it was in no rush to increase interest rates, bond yields slipped with 10-year U.S. Treasury yields retreating to 1.74 percent from 1.84 percent last week. Benchmark yields are down 63 basis points so far this year.

Lower yields on government debt translated into further inflows into relatively higher-yielding corporate debt, with an index of Asian bonds tracked by JP Morgan rising to fresh highs.

Inflows into Asia-focused equity funds also showed a noticeable pickup in recent weeks, according to Thomson Reuters data.

The dollar index against a basket of other major currencies hit a four-week low of 93.745 before bouncing back to 94.066.

The euro eased to $1.13590 after having scaled a four-week high of $1.3930, while the yen also stepped back to 107.545 per dollar from Monday's five-week high of 106.35.

The Australian dollar climbed to a one-month high of $0.7426 after the Reserve Bank of Australia kept rates steady at a policy meeting and investors scaled back expectations of a near-term cut.

Elsewhere, oil prices held firm after crippling attacks on Nigeria's oil industry and fresh draws in U.S. crude stockpiles.

Global crude benchmark Brent futures hit a seven-month high of $50.83 per barrel on Monday before easing to $50.46 early on Tuesday.

U.S. West Texas Intermediate (WTI) crude stood firm in Asia at $49.60 per barrel, after rising 2.2 percent on Monday, its largest gain in three weeks.


Article Link to Reuters:

Brent Crude Holds Near Seven-Month High, Eyes U.S. Stocks Decline

By Osamu Tsukimori
Reuters
June 7, 2016

Brent crude hovered near seven-month highs on Tuesday, retaining the bulk of gains from the previous session, as market sentiment was bolstered by factors such as Nigerian oil infrastructure attacks and projections for falling U.S. crude inventories.

Brent crude for August delivery was down 3 cents at $50.52 a barrel by 0650 GMT, not far from Monday's intraday high of $50.83, the strongest since November.

NYMEX crude for July delivery was steady at $49.69 a barrel, after settling up $1.07 on Monday.

"With Brent staying above $50, oil is on an upward momentum with the restart of French refineries that were shut on strikes and pipeline attacks in Nigeria," said Kaname Gokon at brokerage Okato Shoji in Tokyo.

Preliminary work got underway on Monday to restart three of Total's French oil refineries, stopped as part of nationwide strikes, which would lead to higher crude demand.

Crude futures have gained more than 85 percent from this year's lows following supply outages in Canada, Venezuela, Libya and Nigeria.

Nigeria's Bonny Light crude output is down by an estimated 170,000 barrels per day (bpd) following attacks on pipeline infrastructure, according to a source.

While OPEC failed to agree a clear oil-output strategy last week, traders said Saudi Arabia's promise not to flood the market has provided support to oil.

Oil was also propped up by a weak dollar, which wallowed near four-week lows against a basket of currencies. Federal Reserve Chair Janet Yellen said interest rate hikes are coming but gave little sense of when. [USD/]

U.S. commercial crude oil inventories likely fell by 3.5 million barrels last week, marking a third straight weekly drop, a preliminary Reuters poll showed ahead of the data by the American Petroleum Institute due out at 2030 GMT. [EIA/S]

Oil also got support after market intelligence firm Genscape reported a drawdown of 1.08 million barrels at the Cushing, Oklahoma delivery point for WTI futures last week.

Traders were also awaiting China's trade data for May due out on Wednesday for fresh leads. A series of Chinese indicators are expected to reinforce views that the world's second-largest economy is steadying, but not gaining momentum.

The market braced for signs of recovering U.S. oil production after weekly data from Baker Hughes showed that U.S. drillers added rigs for only the second time this year, analysts said.


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Brent Crude Holds Near Seven-Month High, Eyes U.S. Stocks Decline

Clinton Clinches Democratic Presidential Nomination: AP/NBC

By James Oliphant
Reuters
June 7, 2016

Hillary Clinton has reached the number of delegates needed to clinch the Democratic U.S. presidential nomination, according to tallies on Monday by two U.S. media outlets, the day before six states were set to vote in nominating contests.

A former senator and U.S. secretary of state, Clinton would be the first woman to ever be the presidential candidate of a major political party in the country's 239-year history.

But the campaign of her rival, Bernie Sanders, vowed to keep up the fight in what has been a protracted and increasingly antagonised primary race that has exposed deep rifts between the left-wing and the more centrist of the Democratic Party.

A Sanders campaign spokesman said it was wrong of the Associated Press and NBC News, which made the calls on Monday evening, to count the votes of superdelegates before they cast ballots at the Democratic National Convention in July.

"Our job from now until the convention is to convince those superdelegates that Bernie is by far the strongest candidate against Donald Trump," Sanders' spokesman Michael Briggs said in a statement, castigating what he called the media's "rush to judgment."

While most delegates are awarded by popular votes in state-by-state elections, superdelegates largely consist of party leaders and elected senators, members of Congress and governors, and can change their mind at any time.

For that reason, the Democratic National Committee has echoed the Sanders campaign, saying the superdelegates should not be counted until they vote at the convention in Philadelphia.

But that has not deterred the news media. The AP and NBC reported that Clinton reached the 2,383 delegates needed to become the presumptive Democratic nominee with a decisive weekend victory in Puerto Rico, a U.S. territory, and a burst of additional support from superdelegates.

Sanders, a U.S. senator from Vermont who calls himself a democratic socialist, has commanded huge crowds spilling out of parks and stadiums and has been particularly bolstered by younger voters angered by widening economic inequality with his promise of a "political revolution."

But Clinton, who prefers smaller, round-table events, has continued to edge out Sanders, particularly among older voters with longer ties to the Democratic party. Her less lofty promises focus on improving the policies of her fellow Democrat and former boss, President Barack Obama.

"According to the news, we are on the brink of a historic, historic, unprecedented moment," Clinton told a rally in Long Beach, California, shortly after the AP report.

"But we still have work to do, don't we? We have six elections tomorrow and we're going to fight hard for every single vote, especially right here in California."

Clinton has 1,812 pledged delegates won in primaries and caucuses, and Sanders has 1,521. She also has the support of 571 superdelegates, according to an AP count, compared to 48 for Sanders.

Her campaign manager, Robby Mook, said the media call on Clinton was an "important milestone".

"We look forward to Tuesday night, when Hillary Clinton will clinch not only a win in the popular vote, but also the majority of pledged delegates," he said in a statement on Monday.

Sanders supporters have pointed to the uncertainty of whether or not Clinton or her aides will face criminal charges as a reason for him to remain in the race. Clinton's decision to use an unauthorized private email server kept in her home for her work as secretary of state remains the subject of a criminal inquiry by the Federal Bureau of Investigation.

Earlier on Monday, Clinton called for party unity, suggesting it was time for Sanders, who only joined the Democratic party last year after years as an independent, to abandon his hard-fought challenge.

California Votes

Montana, North Dakota, South Dakota and New Mexico also hold nominating contests on Tuesday, but most attention will focus on California, the country's most populous state where another 475 pledged delegates are at stake.

Clinton once held a sizable lead there over Sanders, but opinion polls in recent days showed them in a dead heat.

A Sanders victory there could embolden his supporters to urge him to wage a fractious convention fight. It could also help Trump, 69, who clinched the Republican nomination last month, argue that she is a weak candidate.

"It's going to make her ability to seal the deal with disaffected Democrats all that much harder," said Jim Manley, a Democratic strategist who supports Clinton. "The only one benefiting from this is Donald Trump."

Trump, the presumptive Republican nominee, has regularly stirred up controversy on the campaign trail. In recent days, his comments about a judge he believes to be biased against him because he is Mexican-American have drawn criticism.

On Monday, Trump, a New York real estate developer, insisted his concerns were valid. Clinton, in an MSNBC interview on Monday, said Trump's comments about the judge were racist and bigoted.

The latest Reuters/Ipsos tracking poll showed Clinton with an 11-percentage-point edge over Trump, 46 percent to 35 percent, a marked change from just 10 days ago, when fewer than 4 points separated the two.


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