Thursday, June 23, 2016

Thursday, June 23, Night Wall Street Roundup: Wall St. Bets On Britain Staying In EU; Stocks Rally

By Rodrigo Campos
Reuters
June 23, 2016

U.S. stocks rallied on Thursday, led by bank shares, as Wall Street bet strongly that Britain is voting to remain part of the European Union, potentially avoiding a hit to European trade and its consequences to global economic growth.

There are no exit polls for the referendum, for which polls close at 5 p.m. EDT. Although bookmakers give the remain camp a more than 80-percent chance of victory, recent polls continued to show the decision as too close to call.

The British pound rallied against the U.S. dollar GBP=, brushing $1.50 to hit its highest since late December. It was recently up 1.22 percent at $1.4882.

"People are expecting that Britain is going to vote to stay in the EU based on what's happening here, particularly with the fact that financials are leading," said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.

"They view the potential disruption of a British exit as a major financial event. The relief rally, makes sense, would be strongest among those names."

The Dow Jones industrial average .DJI rose 230.24 points, or 1.29 percent, to 18,011.07, the S&P 500 .SPX gained 27.87 points, or 1.34 percent, to 2,113.32 and the Nasdaq Composite .IXIC added 76.72 points, or 1.59 percent, to 4,910.04.

The Dow industrials closed back above 18,000 and at its highest since April 27. The financial sector led the S&P 500 with a 2.1 percent gain.

The CBOE Volatility index .VIX fell 18.5 percent, its largest daily percentage decline since October 2013.

Earlier, U.S. jobless claims and factory data pointed to a strengthening economy.

Given the improving economic backdrop, the S&P 500 could hit a record high in the next few days if Britons decide to stay in the EU, Jankovskis said.

"People generally view that as a positive for emerging markets, crude oil, so this suggests this is a rally that would have some legs," he said.

The S&P 500 closed 0.8 percent below its record closing high hit May last year.

Software maker Twilio Inc (TWLO.N) nearly doubled in its market debut, rising as high as $29.60 after pricing at $15. It closed up 91.9 percent at $28.79.

Micron Technology (MU.O) added 10.5 percent at $14.05 in more than three times the average daily volume of the past 10 days.

About 6.4 billion shares changed hands in U.S. exchanges, below the 6.8 billion average over the past 20 sessions.

Advancing issues outnumbered declining ones on the NYSE by a ratio of 4.98-to-1 and on the Nasdaq, a 3.57-to-1 ratio favored advancers.

The S&P 500 posted 52 new 52-week highs and 2 new lows; the Nasdaq recorded 88 new highs and 26 new lows.


Article Link to Reuters:

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Donald Trump Is Too Chaotic To Attack Hillary Clinton Effectively

Trump’s anti-Clinton speech reads like a manic opposition-research dump.


By Brian Beutler
The New Republic
June 23, 2016

The defining quality of Donald Trump’s bill of particulars against Hillary Clinton, laid out in a bullet-pointed speech Wednesday morning, is that much of it was fabricated or embellished. “A lot of what [Trump] just said is flatly not true,” noted NBC News correspondent Andrea Mitchell shortly after his comments concluded.

To the extent that Trump’s comments were false, it was by design. As he does seemingly every time he gets into political trouble for running his mouth, Trump delivered his speech from a teleprompter, which means the inaccuracies were written into the prepared text instead of ad-libbed.

But it’s worth setting aside the factual problems with Trump’s speech briefly to consider whether the attacks themselves, in their basic structure and interplay, should frighten Clinton and the Democrats or not.

I contend they should not. As delivered, Trump’s remarks call into question whether he has the capacity to sustain a thematic line of criticism against Clinton beyond the “Crooked Hillary” sobriquet he perfected on Twitter. Though scripted, Trump’s remarks were scattershot and defensive. In that regard, and in the rather inelegant and desperate way they were deployed to change the current narrative of the race, they resemble the disorganized, information-dump-like attacks his primary campaign rivals aimed at him, just as their campaigns were about to falter. Everything all at once, but too little, too late.

"As good as Trump is at making noise, he doesn’t know how to hold a tune."


That’s a strange tack to take against someone like Hillary Clinton, who is already well defined in the public eye. Rather than identify her agreed-upon weaknesses and use them to paint a clear, confined case against her, Trump vomited up every negative Fox News soundbite and right-wing talking point he’s internalized about her in recent years, hoping that the regurgitated mess would speak for itself.

The final, chunky product might have served to remind avowed Clinton-haters what they dislike about her. But for anyone who wasn’t already sure what to think about her, the mess Trump generated provided little guidance. Here is a representative sample of his attacks:

-- “Hillary Clinton who, as most people know, is a world-class liar. Just look at her pathetic email and server statements, or her phony landing in Bosnia where she said she was under attack but the attack turned out to be young girls handing her flowers, a total self-serving lie.” (Mostly true.)

-- “Hillary Clinton has perfected the politics of personal profit and theft. She ran the State Department like her own personal hedge fund.” (False.)

-- “Hillary Clinton gave China millions of our best jobs, and effectively let China completely rebuild itself. In return, Hillary Clinton got rich!” (Meaningless and only half true.)

-- “[U.S. Libya Ambassador Chris Stevens] was left helpless to die as Hillary Clinton soundly slept in her bed.” (Unsubstantiated but in conflict with Clinton’s account.)

-- “Hillary lied about a video being the cause of [Stevens’] death.” (False.)

-- “Hillary Clinton, who already has the blood of so many on her hands, is now announcing that she is willing to put each and every one of our lives in harms’ way.” (False.)

-- “Hillary also wants to spend hundreds of billions to resettle Middle Eastern refugees in the United States, on top of the current record level of immigration.” (False.)

The speech reads like a manic opposition-research dump—a rather unusual way for a campaign principal to build a case against his opponent.

The 2012 campaign Barack Obama ran against Mitt Romney, to take one contrary example, was much more methodical. Many months before Romney secured the Republican presidential primary, Obama laid the groundwork to run against a heartless plutocrat, proposing a tax reform he called the “Buffett Rule,” which would ensure that high-income earners and people with large investment incomes (people, in other words, like Mitt Romney) wouldn’t pay lower effective tax rates than their employees. Republicans everywhere, including Romney, obligingly inveighed against the proposal.

Obama’s efforts to define Romney flowed from there: He isolated key aspects of Romney’s business record and his political agenda, and held them up through that lens.

What Obama didn’t do was rattle off all the unlovely Romney facts he thought he knew, without any connective tissue binding them together into an organic whole. That job (such as it was) fell to surrogates, SuperPACs, and, through opposition research, to the media as well.

Clinton’s campaign against Trump is following a similar trajectory, stemming from a single, cohesive critique of Trump’s temperament. The consistency and cohesion are crucial: Voters may know they’re not supposed to like Trump, but they may not be sure why. Harping on a single, compelling reason is the best way to inform them.

Trump seems incapable of this. His preferred style is cacophony, rather than variations on a theme, and it will be to his detriment, whether he’s attacking Clinton with facts or falsities. She has weaknesses as a candidate, and no matter how poorly he runs his campaign, he will be able to exploit some of them. But if Wednesday’s speech was any indication, he isn’t disciplined enough to distill Clinton’s character for voters overwhelmed with conflicting information. As good as Trump is at making noise, he doesn’t know how to hold a tune.


Article Link to The New Republic:

Ideologues Make For Dangerous Politicians

Opportunists are at least attuned to public opinion, unlike ideologues.


By Victor Davis Hanson 
The National Review
June 23, 2016

Hillary Clinton is a seasoned liberal politician, but one with few core beliefs. Her positions on subjects such as gay marriage, free-trade agreements, the Keystone XL pipeline, the Iraq War, the Assad regime in Syria, and the use of the term “radical Islam” all seem to hinge on what she perceives 51 percent of the public to believe on any given day.

Such politicians believe truth is a relative construct. Things are deemed false by politicians only if they cannot convince the public that they are true — and vice versa. When the majority of Americans no longer believe Clinton’s yarns about her private e-mail server to the point of not wanting to vote for her, then she will change her narrative and create new, convenient truths to reflect the new consensus.

Donald Trump is an amateur politician but a politician nevertheless. He is ostensibly conservative, but he likewise seems to change his positions on a number of issues — from abortion to the Iraq War — depending on what he feels has become the majority position. And as with Clinton, Trump’s idea of truth is defined as what works, while falsity is simply any narrative that proved unusable.

Politicians glad-hand, pander, and kiss babies as they seek to become megaphones for majority opinions. But ideologues are different. They often brood and lecture that their utopian dreams are not shared by the supposedly less informed public.

To gain power, of course, ideologues can temporarily become political animals. Barack Obama ran in 2008 on popular positions such as reducing the national debt and opposing gay marriage and immigration amnesties, only to flip after he was re-elected and no longer needed to pander to perceived majority opinions.

But otherwise, Obama the ideologue seems to believe that big, redistributive government is always necessary to achieve a mandated equality of result — regardless of whether it ever works or should work in reality. He opposes a reduction in capital-gains tax rates even though he concedes that such cuts might bring in more revenue.

The administration has deemed the Affordable Care Act successful even though Obama’s assurances that it would lower deductibles and premiums, give patients greater choices, and ensure continuity in medical providers and plans have all proven to be untrue.

No matter: Obamacare fulfills the president’s preconceived notion that state-mandated health care is superior to what the private sector can provide.

Abroad, Obama starts from the premise that an overweening U.S. is not to be congratulated for saving the world in World War II, winning the Cold War, and ushering in globalization. Instead, its inherent unfairness to indigenous peoples, its opposition to revolutionary regimes and its supposed interventionist bullying disqualify it from being a moral and muscular leader of the world.

As a consequence of all this, facts often must be created to match pre-existing ideology.

A homophobic, radical Islamic terrorist in Orlando shouted “Allahu Akbar” as he mowed down the innocent in a gay nightclub. He called 9-1-1 to make sure the world knew that his killing spree was in service to the Islamic State. And in the midst of his murdering, he even called a local TV news station to brag on his jihadist martyrdom in progress. No matter. To Obama, who asserts that radical Islamic terrorism, which he refuses to identify in such terms, poses little threat (far less of a threat, he has said, than the dangers posed by accidental falls in bathtubs), the Orlando shooting was instead a symptom of a lack of gun control or endemic homophobia — anything other than what the killer himself said it was.

Guns, of course, had nothing to do with the 3,000 people killed on 9/11, with the Boston Marathon bombing, or with recent terrorist attacks in Oklahoma and at the University of California at Merced perpetrated by blade-wielding assailants. Tight restrictions on semi-automatic weapons could no more stop shootings in Europe than stop an epidemic of inner-city shootings in Chicago. No matter: The Orlando shooting must be ascribed to the availability of guns rather than to radical Islamic terrorism.

In both word and deed, Iran, Cuba, and Turkey are revolutionary societies in turmoil that have often voiced anti-Americanism. But to Obama, who at times has warmed up to all three, those regimes fit his deductive notion that America’s past behavior has earned it understandable antipathy from countries with legitimate grievances.

Bipartisan analyses agree that the withdrawal of all troops from Iraq in December 2011 threw away the victory obtained by the American surge of 2007, eroded the foundation of the nascent Iraqi democracy, and helped to birth and empower the Islamic State.

But to an ideologue such as Obama, the withdrawal simply reflected a universal truth that the U.S. must get out and leave the Middle East to its rightful owners — even if the president has been forced to send nearly 5,000 troops back into Iraq.

In general, politicians are rank opportunists, but at least most of them are malleable and attuned to public opinion.

But ideologues are far more anti-empirical — and thus dangerous.


Article Link to the National Review:

US Troops In Syria Is Starting To Look Inevitable

By Benny Avni
The New York Post
June 23, 2016

If Hillary Clinton is the next US president, prepare for a deeper American military involvement in Syria’s civil war — one that won’t seek to maintain a status quo but to crush ISIS where it’s strongest, perhaps with American boots on the ground.

That, after all, is the only way we’ll weaken the Islamic State enough to prevent the terror group from committing and inspiring attacks on our soil — like Omar Mateen’s Orlando massacre.

In an interview with the Web site Defense One, former top Pentagon official Michele Flournoy indicated that she’d advise the next president to “direct US troops to push President Bashar al-Assad’s forces out of southern Syria and . . . send more American boots to fight the Islamic State in the region.”

Flournoy, widely presumed to be Clinton’s top candidate for secretary of defense, later clarified that she’s calling for “doing more to support our partners on the ground to make them more effective” in Syria, but denied that she’s advocated “putting US combat troops on the ground to take territory from Assad’s forces or remove Assad from power.”

That hedge — that she’s not calling for troops to be used against Assad — is revealing.

And hers is but one voice in a growing Washington chorus of veteran Obama officials who seem to nudge Clinton (or Donald Trump for that matter) away from our current approach to Syria and the rest of the region.

Why? As we speak, ISIS metastasizes around the globe like malignant cancer in the body of a lifelong smoker.

Groups in Libya, Egypt’s Sinai, Nigeria, Indonesia and countless other Muslim countries have pledged allegiance to Abu Bakr al-Baghdadi and ISIS. His admirers in Europe are increasingly deadly and, as Mateen indicates, America isn’t immune either.

What’s behind the growing allure of al-Baghdadi and ISIS to Muslims around the world? It’s the aura of invincibility. ISIS is like Charlie Sheen endlessly declaring “winning.” Reversing that false impression must start in Raqqa, Syria, where al-Baghdadi has his headquarters, and in Iraq, where ISIS initially scored its most impressive victories.

No one believes Obama’s policies have helped all that much in addressing the horrors of the 21st century’s deadliest war, with half a million dead and half of the country displaced, threatening to change Europe forever. ISIS and its ilk thrive when states collapse and warring factions jockey for territory.

So last week, 51 State Department officials reactivated a rarely used dissent channel to express their dissatisfaction with the White House’s Syria policies. “Achieving our objectives will continue to elude us if we do not include the use of military force” there, they wrote.

According to Obama’s former top Syria adviser Fred Hof, that letter “killed the White House pretense that critics of the administration’s Syria policy are partisan politicians, war-mongering neoconservatives, and clueless think tankers.”

Robert Ford, Obama’s former ambassador to Syria, added, “The dissent memo should wake us up that the current approach ensures we will not secure our national interest in Syria, that broader US interests will suffer as a consequence, and we need to reconsider our approach.”

To be fair to Obama, he’s not totally ignoring the war on ISIS in Syria and Iraq. But as Josh Rogin reported Wednesday in The Washington Post, the US generals on the ground believe they need hundreds more troops to win, yet are afraid to ask for them because they know the White House won’t approve the request.

Waging a war halfheartedly is a sure way to lose it. Yet that’s been Obama’s approach to global conflicts. Even when dragged kicking and screaming to use some semblance of military force to enhance American interests, he tends to tie the military’s hands by putting expiration dates on missions and by insisting we don’t and won’t have boots on the ground.

Which brings us back to the next president, and what to do about the endless Syria bleed. She (or he) must first “put forward a vision of what the end game should be,” says Daveed Gartenstein-Ross, a senior fellow at the Federation to Defend Democracies.

Breaking up Syria and Iraq and creating statelets according to sectarian affiliation, perhaps with a weak federal government in Baghdad, Damascus or both, is one option for that end game. Other plans exist as well, but none will work unless America commits more military assets to show we have serious skin in the game.

Clinton indicates her policies will be more muscular than Obama’s, while Trump’s harder to predict but seems to lean in that direction as well.

Which means there’s a new consensus in Washington: America can’t just continue to essentially sit out the most consequential war of our time. Voices who’ve long warned that that war would sooner or later come back here to harm us have been ignored for too long.


Article Link to The New York Post:

Kaine Rises To Top Of Clinton's Veep List

The selection process is colored by new uncertainty among Democrats about whether Trump will be the GOP nominee.


By Annie Karni and Gabriel Debenedetti
Politico 
June 23, 2016

Virginia Sen. Tim Kaine is emerging as the leading candidate atop Hillary Clinton’s vice presidential short list, according to Democratic allies and operatives close to the campaign.

Sen. Elizabeth Warren and HUD Secretary Julian Castro are also top prospects for the Democratic ticket — both representing nods to important Democratic constituencies.

But they have serious drawbacks that make them less appealing for Clinton than the Spanish-speaking, Terry McAuliffe-endorsed, former missionary and swing state governor, who was a finalist in Barack Obama’s vice presidential vetting process eight years ago.

Kaine currently towers over other top-tier candidates still in consideration like New Jersey Sen. Cory Booker, Labor Secretary Tom Perez, California Rep. Xavier Becerra and Ohio Sen. Sherrod Brown.

“Tim Kaine was a finalist eight years ago because of his executive experience, solidity, values, standing in a critical state and overall profile as someone who would be a good governing partner to Obama,” said former Obama senior strategist David Axelrod, who was involved in the selection process eight years ago. “He was very much in contention and highly regarded.”

The selection process, however, is colored by new uncertainty among Democratic donors and Clinton allies who are no longer convinced that Donald Trump is sure to be the GOP nominee. A big advantage of holding their convention second, Democrats said, was being able to make a final pick with full knowledge of the GOP ticket.

At a fundraiser in Manhattan earlier this week, Clinton was peppered with questions from her top donors about whether there is any chance that the Republicans could nominate someone else — she said she thought the chances of that outcome were low.

Clinton also joked that she is still open to expanding her vice presidential search beyond the list of elected officials that so far has emerged. “If anyone has any ideas, let me know,” she told the crowd. “If anyone wants to put their name in the ring, let me know.”

Clinton allies said that the campaign has been keen on Kaine for months. But like Obama, who also focused on Joe Biden from the beginning but went through the due diligence of looking closely at different models, Clinton is still vetting a host of candidates.

Castro, 41, makes for a nice tableau standing next to Clinton: a rising Latino star of the Democratic Party, paired with the older, experienced, first female major party nominee, gives the sense of a big tent party. Castro has been working hard for Clinton on the trail, traveling to 11 states as a surrogate, but Democrats close to the campaign said there is concern his inexperience would cramp Clinton’s ability to frame Trump as someone lacking the appropriate resume for the Oval Office.

The progressive revolt against Castro over his handling of mortgage sales — no small concern for a party struggling to win over voters with deep reservations about Clinton’s brand of center-left pragmatism and her ties to Wall Street — has also raised some red flags.

Warren, 67, the fantasy number two pick for many progressive-leaning Democrats, offers the promise of a historic two-woman ticket, and would help soothe the hurt feelings of millions of Bernie Sanders supporters who find great appeal in the message of an economic system that is rigged for those at the top.

But the Massachusetts senator is seen as a potentially difficult bedfellow for the next eight years, and there is a lack of any personal relationship between the two leaders to draw on. There’s also a sense in Clinton circles that in a race against Trump, Clinton doesn’t need to make what would be a buzzy but risky bet with a number two who has her own clear agenda to push — one that has not always been in line with Clinton’s. Warren insiders have expressed distrust of Clinton on her core issue of Wall Street reform.

Nevertheless, Warren appears to be pursuing the job in recent weeks, serving as the lead attack dog against Trump. Last week, she visited Clinton’s Brooklyn headquarters to rally the troops with a typically blunt Warren message, “Don’t screw this up!”

On Monday she will appear for her first joint rally with Clinton in Ohio. Warren has met with James Hamilton, the veteran attorney overseeing the campaign’s vetting process, the New York Times reported Tuesday.

Still, campaign allies view Warren as a long shot. “At the end of the day, Warren would be the same thing as Bernie Sanders,” said one Clinton fundraiser. “She doesn't need Warren. She wants a relationship with whoever her vice president is.”

One dark horse that Clinton allies said is also on the list is Minnesota Sen. Al Franken, a close ally who is also popular with the progressive wing of the party and enjoys a closer bond with Clinton.

But Kaine, 58, is still viewed as the safest and most attractive option. Unlike Warren, who sat out the primary and endorsed after President Obama did, Kaine came around to Clinton two years ago, joining the “Ready for Hillary” group in 2014 at the South Carolina Democratic Party women’s breakfast. He was an active member of the group, sending surrogate emails and fundraising, according to a former operative. Over the past year, he has traveled to seven states as a Clinton surrogate and is often on campaign calls with reporters.

In February, for example, during one of the low points of Clinton’s campaign, Kaine, who sits on both the Senate Armed Services and Foreign Relations committees, spoke about the “commander-in-chief gap” between Sanders and Clinton on a conference call with the press.

With a five to eight point lead in the most recent national polls, and a huge advantage in cash over Trump, Clinton does not need to take a big risk, said half a dozen Democrats close to her campaign.

“She is in a strong position and doesn’t need to throw the long ball,” said Democratic consultant Michael Feldman, a former top aide to Al Gore. “More important, she is experienced and has been around the process long enough to know the essential criteria. Do no harm, because the downside of a mistake is greater than the upside of a great choice. Make sure it is someone who you are ready to work down the hall from for the next four to eight years.”

Kaine's office has helpful ties to Clinton, too. His chief of staff, Mike Henry, was a deputy campaign manager for Clinton's 2008 presidential campaign and went on to run Terry McAuliffe's campaign for Virginia governor later that year. The idea of McAuliffe, Clinton’s most trusted ally, filling his vacant seat is also appealing.

The Clinton team is not currently vetting Sanders, and has not reached out to ask for any input as it conducts its the vice presidential search.

For now, the group overseeing the process includes Clinton’s innermost circle: Huma Abedin, campaign chairman John Podesta, senior policy adviser Jake Sullivan and Cheryl Mills, her former chief of state at the State Department who has no formal campaign role.

A source with knowledge of the process said they have finished the first wave of vetting a long list of potential picks, which involves collecting publicly available information about all the candidates. The campaign is now asking a shorter list to fill out lengthy questionnaires. A Clinton campaign spokesman declined to comment on the entire process.

Bill Clinton is also expected to have a major say in any final decision, and notably spent quality time in California with Perez, who is seen as having appeal to both the party's liberal wing and Hispanic constituencies.

The one knock against Kaine is that he would not energize minority turnout. “If there's any worry I have, it is that black and brown and young people folks don't come out in the higher number that we need them to come out in order for her to securely win,” said South Carolina state party chairman Jaime Harrison, referring to the party’s November calculus. “That is the thing that worries me the most. It's always about whether or not your base is motivated to come out.”

In the end, however, Clinton is looking for someone who will burnish her own profile on the road to November.

“Do you want someone you're comfortable with, or is there a political objective you have to accomplish,” said longtime Clinton ally James Carville, who was involved with Bill Clinton’s choice of Al Gore in 1992.

He said the magic of the Gore pick — which was a move to double down on young, white Southern reformers rather than to broaden the base — was that it amplified Bill Clinton’s virtues. The magic formula, Carville said, ultimately comes down to chemistry: “You looking for 2 + 2 equals 4.1.”


Article Link to Politico:

Wall Street Holds Its Breath On Brexit

Clinton, Democrats could suffer if U.K. voters pull out of EU, causing a global financial sell-off.


By Ben White
Politico
June 23, 2016

NEW YORK — Wall Street is breathlessly on edge over the U.K.’s Brexit vote on Thursday, with many analysts fearing a major sell-off and possible global slowdown if the country votes to leave the European Union.

Many Democrats also fear a vote by the UK to leave the EU will suggest that a nationalistic, anti-immigration political wave that is also sweeping the United States could be much stronger than expected.

Current polls suggest the “Remain” side has a narrow lead in the U.K. But the referendum could swing either way and Wall Street analysts fear that a surprise “Leave” victory would send stock prices sharply lower, increase uncertainty about a complete unraveling of the EU and damage a United States economy that is barely growing and remains highly susceptible to outside shocks.

“My expectation is Remain wins,” said Jim Paulsen, chief investment strategist at Wells Capital Management. “If Leave wins there will be an immediate reaction with sharp losses in stock markets across the globe. Emerging market stocks will also be hit hard. Oil prices will decline significantly. The U.K. pound will decline significantly.”

The shock to U.S. could be even greater because for months, both polls and betting markets suggested that Remain would win fairly handily following stark warnings from leaders across the globe — including President Barack Obama — that a vote to leave the EU would be terrible for both the British and global economy.

“An exit vote would catch investors flatfooted, as most of us are relying on local betting figures to conclude that Brexit is an unlikelihood,” said Jack Ablin, chief investment officer at BMO Private Bank. “Banks with London financial centers would bear most of the brunt of selling, as investors anticipate trading would shift to a euro-based city, like Frankfurt. We would expect a dollar and yen rally against the pound and euro weakness as capital shifts away from the region. It would be hard to predict how hard stocks could get hit since the blowback from the vote would play out over a couple of years.”

A strengthening dollar in the wake of a Leave vote could be bad for the United States because it would make exports more expensive, hurting companies that sell abroad. Some analysts also fear a contagion impact if European banks or big hedge funds struggle following a Leave vote leading to the kind of loss of confidence and even flat-out panic that emerged during the global financial crisis of 2008.

Should U.S. markets suffer and bank stability come into question, a Leave vote could threaten growth in the United States, which clocked in at just 0.8 percent in the first quarter. Jobs gains in the US are also slowing significantly.

Federal Reserve Chair Janet Yellen, in testimony on Capitol Hill this week, cited the Brexit vote as a significant risk to the domestic economy though she stopped short of saying a Leave vote would cause a recession.

“I don't think that is the most likely case,” she said. “But we just don't really know what will happen and we will have to watch very carefully.” The Brexit vote is widely viewed as one of the main reasons the Fed declined to raise interest rates at its meeting earlier this month.

A Brexit-induced slowdown would clearly be unwelcome news for presumptive Democratic nominee Hillary Clinton, who is counting on a solid economy and declining unemployment to drive her to victory in November over presumptive GOP nominee Donald Trump.

But beyond any economic impact, top Democrats fear that a surprise win for the Leave camp would suggest that a populist wave that opposes immigration and unfettered free trade may be stronger than polls on both sides of the Atlantic suggest. That would be good news for Trump, who has spoken in favor of Britain voting to leave the U.K.

“The Trump people will be overjoyed if Leave wins,” said Austan Goolsbee, a professor at the University of Chicago and former top economic adviser to Obama. “It would say that the same problems we have with accurate polling in the U.S. exist in the U.K. and that the populist element is much stronger than polls say.”

Goolsbee added that the “Brexit” vote in the U.K. has become essentially a “referendum on immigration,” with British citizens in favor of leaving arguing that the EU’s more liberal approach to migration leaves countries vulnerable to the kind of terrorist attack that rocked Paris last year. Leave proponents have also cited the recent mass shooting in Orlando to press their case.

Many analysts suggest that if a vote by the U.K. to leave the EU happened in a vacuum, it would likely produce only a small bout of market volatility as Britain attempted to reestablish trade ties with the U.S. and other nations. But populist sentiment is also rising in France, Italy and other European nations and a win for Leave could spark a series of similar votes that could destroy the EU, an institution created to integrate Europe and avoid the kind of populist nationalism that led to centuries of war across the continent.

“I do think it would start a chain reaction of events that are very likely to blow the Eurozone apart,” said Goolsbee. “Many countries will say they want to have their own vote.”

The world is not likely to know the result of the Brexit vote until early Friday morning. There are no official exit polls being conducted and voting will remain open until 10:00 p.m. in the U.K., or 5:00 p.m. Eastern Time in the U.S. on Thursday, well after most markets close. U.K. officials say they will have a result “around breakfast time” on Friday, meaning U.S. investors will learn the results overnight Thursday night.

So any big impact would begin in Asian trading on Friday and then spread across the rest of the globe. U.K. Prime Minister David Cameron, who promised to hold the vote during a difficult re-election campaign, told the Financial Times this week that he believed a vote to remain would spark a relief rally.

“I think on Friday that businesses, wealth creators, job creators will think: Britain has made a decision, let’s pile back into the economy and create jobs and opportunity because it’s a great place to do business,” he said.

U.S. analysts believe a similar rally could occur here if Remain wins, driving away one big uncertainty that has been hanging over markets.

“If Remain does indeed come out on top, the dollar likely will dip a bit further against both sterling and the euro, while stocks and Treasury yields should rise slightly, as the remaining risk of Brexit drains from the markets,” Ian Shepherdson of Pantheon Macroeconomics wrote in a note to clients on Thursday.

Such a vote would also come as a big relief to Clinton’s campaign staff in Brooklyn, as another big economic wild card is removed from the presidential campaign.


Article Link To Politico:

Wall Street Holds Its Breath On Brexit

Thursday, June 23, Morning Global Market Roundup: Sterling Hits 2016 High, Stocks Climb As UK Votes On Brexit

By Marc Jones
Reuters
June 23, 2016

Sterling hit a 2016 high and world stocks climbed for a fifth day running on Thursday, as British voters headed to the polls for a crucial vote on their European Union membership.

Financial markets have been wracked for months by worries about what a potential Brexit would mean for Europe's stability but the latest opinion polls showing the "Remain" camp holding a small lead have provided some comfort.

The pound, which has been the lightning rod of Brexit opinion throughout the six-month campaign, was up 0.3 percent at $1.4765 GBP=D4 in early European trading having risen to its 2016 high of $1.4847 overnight.

In the equity markets, London's FTSE .FTSE was up 0.6 percent and neck and neck with German's DAX .GDAXI at the top of European leader board, both of which helped push MSCI's 46-country All World index higher. .MIWD00000PUS

"You look at the markets and they expecting a remain win, cable (sterling/dollar) at above $1.48 at one point this morning tells you it all," said Societe Generale FX strategist Alvin Tan.

With the polls still incredibly tight and having proved unreliable in last year's UK election, caution remained however.

Share trading across Europe was just a third of its normal level and two-thirds lower than average on the UK's FTSE .FTSE Reuters data showed. (here#/Explorer/GzEQzINDICESxOV?s=GEQ04%2BAP%2B7Z)

Away from the Brexit debate, Norway's crown jumped to a 10-day high as its central bank kept interest rates steady.

Traders were also digesting disappointing June euro zone PMI data as a surprising bounce in manufacturing activity couldn't offset a marked slowdown in service industry growth.

That came ahead of the results of the first of the European Central Bank's revamped long-term loan offers. It is now effectively paying banks to lend the cash they take to the euro zone's firms and consumers.

Wall Street was expected to reopen around 0.5 percent higher later ESc1. Overnight MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS ended up 0.3 percent with Tokyo's Nikkei .N225 nearly 1 percent higher.

"Most people at this point expect a rise in the market" on expectations the vote will favor Britain staying in the EU, said Isao Kubo, an equity strategist at Nissay Asset Management.

"But you never know, and it will be clear by tomorrow so you don't want to take new positions now."

Volatility 

The Brexit vote nerves kept safe-haven government bonds firm with 10-year German and Japanese bonds yielding 0.05 percent DE10YT=TWEB and 0.13 JP10YT=RR percent respectively compared to 1.70 percent for U.S. Treasuries US10YT=RR.

Spot gold XAU= hit a two-week low of $1,260.36 an ounce though and the main market 'fear-gauge' the VIX volatility index .VIX saw its biggest drop in a month. .V2TX

Investors were heading to the sidelines ahead of the referendum as a closely fought vote meant any large positions taken before the outcome was vulnerable to being stopped out. A Bank of America Merrill Lynch fund manager poll last week found investors' cash levels at their highest since November 2001.

Some investors such as George Soros expect the value of the British pound to decline by as much as 15 percent from current levels in the event of a British exit from the EU.

The demand for the perceived safe-haven yen remained broadly intact with the dollar adding just 0.2 percent to 104.63 yen JPY=, while the euro gained 0.6 percent to 118.67 yen EURJPY=.

The euro rose 0.4 percent to $1.1334 EUR=, while the dollar index, which tracks the greenback against a basket of six rival currencies, slipped 0.25 percent to 93.479 .DXY.

"It will be hard for the market to move until the poll results are released. The pound obviously will take center stage. But other European currencies and particularly dollar/yen also bear watching as the pair will reflect swings in risk sentiment," said Shin Kadota, chief Japan FX strategist at Barclays in Tokyo.

Before the vote, exchanges and market regulators moved in to tighten risk management systems. Singapore's stock exchange (SGXL.SI) said it has raised the amount of cash firms must pledge to cover trading positions while central banks stood by to pump in emergency cash.


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Oil Rises As Investors Await Brexit Vote

By Karolin Schaps
Reuters
June 23, 2016

Oil prices edged higher on Thursday, shrugging off a smaller than expected draw on U.S. crude stocks as money and equity markets firmed on the last sweep of opinion polls showing Britons favored to remain in the European Union (EU).

Global markets, including commodities, have been on tenterhooks for weeks ahead of Britain's so-called Brexit referendum on Thursday. The majority of results are expected to come in between 0100 and 0300 GMT following a YouGov poll shortly after voting closes at 2100 GMT.

Global benchmark front-month Brent crude LCOc1 was trading up 31 cents at $50.19 a barrel by 0900 GMT. U.S. futures stood at $49.39, up 26 cents day on day.

"Most market participants are positioned ahead of the Brexit voting or are waiting on the sidelines to see the final outcome," said Hans van Cleef, senior energy economist at ABN Amro.

Some of the last opinion polls published late on Wednesday, hours before voting started, showed the "Remain" campaign was ahead.

This propelled sterling to a 2016 high against the dollar on Thursday and London's FTSE 100 index was up 0.8 percent.

Oil defied bearish news that U.S. weekly crude inventories dropped by less than expected. The Energy Information Administration said on Wednesday that stocks fell by 917,000 barrels in the week to June 17, compared with expectations of a 1.7 million barrel decrease. [EIA/S]

If Britain votes to remain in the EU, the oil market is likely to switch its focus to fundamentals, returning its attention to potential supply disruptions that have already sent prices higher this year.

Saudi Arabia's energy minister told state-owned television that the oil market was returning to balance and prices had risen in response to supply and demand edging closer to equilibrium.


Article Link to Reuters:

Democrats Shout Down Ryan As Guns Sit-In Stretches Past Midnight

Republicans used a late-night parliamentary maneuver to try to short-circuit the sit-in.


By Rachael BadeJohn Bresnahan and Heather Caygle
Politico
June 23, 2016

House Democrats late Wednesday night resumed their “sit-in” on the House floor after Speaker Paul Ryan tried to break up their chaotic, daylong demonstration over gun control.

Following a temporary interruption for a 10 p.m. vote — when Democrats booed and shouted “shame!" at Ryan (R-Wis.) — a group of Democrats said they planned to occupy the floor all night. At one point, after a shouting match broke out between lawmakers, and Democratic supporters started jeering Republican lawmakers from the chamber's visitors gallery, House security was forced to intervene.

Minority Whip Steny Hoyer (D-Md.) told reporters that Democrats would likely continue their crusade on Thursday and maybe even Friday as well, assuming Ryan continues to refuse to hold a vote on a proposal designed to bar people on the “no fly” list from purchasing guns.

"I couldn't predict" how long it will go on, Hoyer said. "I mean tomorrow, and the next day... You've seen folks in the (House) gallery; they're pretty fired up on this. It could go through Friday."

Republicans used a parliamentary maneuver after midnight to try to short-circuit the Democratic sit-in. They rushed through debate on a funding bill to combat the Zika virus, as well as a measure to fund military construction and the Veterans Affairs department. Republicans then prepared to adjourn until July 5; if that happens, Democrats would be denied any chance for votes on their gun bill. But that is the power of the majority.

House leadership earlier in the day suggested they weren't interested in bringing security in to escort Democrats out, but they also weren't willing to give them the votes they wanted.

Democrats had seized the floor just before noon, vowing to block any House legislative action until Ryan promised to allow a roll call on what they believe is a reasonable proposal: blocking suspected terrorists on the no-fly list from purchasing guns.

Republicans recessed the House and turned off the chamber video cameras. But that only drew more attention to the "sit-in," as lawmakers whipped out their phones and started streaming their efforts online, which was in turn broadcast by C-SPAN. The protest soon became the story of the day, leading news websites across the nation.

Ryan entered the chamber at 10 p.m. to break up the protest by moving to a vote on unrelated legislation to override an Obama administration rule. But as he sought to restore order in the chamber, Democrats chanted "No bill, no break!" — a reference to the upcoming July recess they want to postpone until a vote on gun control is held.

Ryan, however, is refusing to allow such a vote. Earlier Wednesday, he called the protest "nothing more than a publicity stunt," noting that the bill at issue was recently defeated in the Senate. "We're not going to take away a citizen's constitutional rights without due process," the speaker told CNN.

Ryan and other Republicans say that relenting to Democrats' demand would only encourage more protests and distort the majority party's prerogative to decide which bills reach the floor, a bad precedent for the House in general.

The clash on the floor during the vote on the unrelated bill was ugly, a scene even longtime Hill observers have said they've never witnessed before.

Democrats who had been in the chamber all day for the protest moaned when the House stenographer came back into the chamber to take her spot, in preparation for the vote. Several dozen Democrats sat in front of the House podium to fill the area where members occasionally cast votes.

A few minutes before the vote started, as Ryan took to the podium and slammed his wooden gavel, Democrats started chanting. Guests watching from the gallery inside joined in, pumped their fists in the air and clapping. A few Republicans, entering the chamber for the vote, stood for several moments to take in the surreal scene.

Lawmakers held up signs with the names of victims of gun violence, creating a sea of stark white papers with bold black letters waiving on the House floor. Other members held pictures of victims and signs that said “Disarm Hate” printed on a rainbow background.

Just before the vote, Rep. Gwen Moore (D-Wis.) recited a poem on the floor about gun violence.

Ryan tried to speak over the crowd to call the vote, but no one in the chamber could hear him. Police quieted the public sitting in the gallery, in accordance with House rules that bar observers from cheering, but Democratic shouts still drowned out Ryan.

Despite the inability to hear, he called the vote. And Republicans started voting.

Democrats were voting using paper cards — as opposed to the electronic vote House members normally employ — in an attempt to slow down the vote.

Republicans mostly kept to their side of the room, some standing to watch while others sat and chatted among themselves.

Throughout the vote, Democrats crowded the well, chanting and holding up the names of gun violence victims.

“Give them a vote,” Democrats shouted, shaking their papers with victims’ names.

Earlier, as Ryan stepped off the dais at the beginning of the vote, Democrats booed the speaker and shouted "shame! shame! shame!" at him.

And Democrats at one point during the same series sang "We Shall Overcome," echoing a crowd that sang the civil rights hymn hours earlier outside the Capitol.

After the vote, several Democrats went outside the House to greet a crowd that had gathered during the day to support them. Others stayed inside the gallery to continue blasting their GOP colleagues' unwillingness to do anything about what they believe is a major gun epidemic.

Rep. Louie Gohmert (R-Texas) walked over to the area Democrats were sitting and started lecturing them that the Orlando shooting was caused by "radical Islam" — and was not an issue of guns.

Gohmert and Rep. Corrine Brown (D-Fla.) got into a shouting match. Lawmakers had to break them up, and House guards with the Sergeant at Arms took to the floor to ready for any more trouble.

Up in the visitors gallery, where onlookers had gathered to support Democrats in their protest, Capitol Police started escorting out some viewers they said had shouted at House Republicans during the vote. That goes against House rules, which require viewers be silent and not disrupt the floor.

House Democratic Caucus Chairman Xavier Becerra and Rep. Maxine Waters, both California Democrats, ran up the stairs to play mediator, eventually convincing security to allow their supporters to stay.


Russia And America: The World Is Big Enough For Both Of Us

There's room for Moscow in the global order.


The National Interest
June 23, 2016

U.S. foreign policy over the coming decade is likely to focus on the task of managing relations among a collection of tough, ambitious great powers that are determined to shift at least some of the global balance of power away from the United States. The list includes not just China and Russia but also countries like Brazil, Turkey, Indonesia and India—emerging democracies and fully “responsible stakeholders” in the current system, but states that nonetheless demand a more prominent voice in its operations. Such a challenge is just what a realist would expect from an increasingly multipolar, and persistently competitive, world order. Yet it is important to realize just how novel a challenge it will be for the United States; there is no modern parallel to this sort of kaleidoscopic relationship management among a crowd of ambitious great powers.

The challenge offers two dominant, and opposing, dangers. One is that the United States underplays emerging rivalries, particularly with China and Russia, and fails to balance those two states’ regional ambitions. The other is that Washington, accustomed to running a world order of its own making, exaggerates the threat from China and Russia while growing increasingly resentful of the unwillingness of other leading powers to toe the U.S. line.

Thomas Graham’s recent TNI essay on managing relations with Russia is a welcome antidote to such extremes. He offers a nuanced way forward and sensible policy advice. He does raise one issue that deserves more discussion: the value of nesting U.S. policy toward Russia within a rules-based international order. For his part, Graham is pessimistic; integrating Russia into the Euro-Atlantic community is now “beyond reach,” he contends, because Russia is “sharpening its challenge to the U.S.-led world order.” To be sure, the prospect of Russia joining Euro-Atlantic institutions as a full-fledged member remains far off. But the United States can nonetheless use the structures of the postwar order to recognize Russian concerns, provide Moscow with a voice and ultimately shape Russian behavior. Its approach to Russia—and any other great power—will ultimately be more effective if grounded in the rules, norms and institutions that have come to characterize the postwar global system.

That order was a product of the idealistic World War II hope for a rule-governed postwar world. It represented a wide range of elements that in some cases applied globally (such as the United Nations system), in other cases were open to any who would accept a specific rule set (such as the World Trade Organization) and in still others provided for a deepening of the order among value-sharing democracies (such as the European Union and NATO). The essential idea of the order was to learn the lessons of the 1930s and avoid the economic chaos and geopolitical confrontations that gave rise to the war by shaping the preferences and behavior of states.

This order became the architecture for U.S. grand strategy and has played an important role in supporting the pursuit of U.S. goals. It has not produced peace or prosperity on its own, but that is holding it to an unfair standard; its components were always designed to work alongside global economic integration and U.S. military and diplomatic power. Viewed this way, the elements of the postwar order fit easily within an important strand of realist thinking. States can pursue self-interest in many ways—including cooperation, sometimes institutionalized with international organizations and expressed in the form of generally followed norms.

Such orders also reflect a classically constructivist idea about state goals: great powers seek more than material objectives. They also crave recognition, prestige and status in a shared global system. An institutionalized order can provide a convenient means of granting such status, by creating clear signals of membership and mutual respect. Norms of behavior gain traction in part because of states’ desire to remain part of the “club,” and avoid the stigma and shaming that goes with breaking the assumed rules.

All of which points to the potential value of building a nuanced U.S. strategy toward more ambitious and sometimes belligerent rivals within the context of a rules-based order.

Increasingly, the default line of thinking in Washington is to view Russia—at least Vladimir Putin’s regime—as a prospective enemy, and a hard-hearted opponent of the U.S.-led order. There can be no doubt that Russia has turned some sort of corner, after years of flirting with the idea of becoming more integrated with Western institutions. Putin has intensified his critiques of U.S.-led institutions and expanded Russia’s efforts to destabilize key organizations like NATO and the EU. His actions in Ukraine have violated central norms of the order.

Yet as Graham carefully documents, despite Moscow’s undeniable belligerence, the United States and Russia continue to share significant interests. They cooperate in limited but important ways, from counterterrorism to nonproliferation to global economic matters. As much as Moscow has complained bitterly about elements of the order that it considers threatening—such as U.S.-led democracy promotion in eastern Europe—Russian leaders have been careful to emphasize the value of the United Nations system, guidelines that apply to everyone (including the United States) and other advantages of a rules-based order. Russia is not trying to foist a universal ideology on the world, and no one worries about Russian ambitions to push tank divisions across the whole of Europe.

In this context, continuing to keep Russia engaged in elements of the order where possible will provide a stronger basis for enforcing norms and rules than using a U.S.-centric system to exclude Russia. A structured, rule-based order can help define the ways in which countries seek status and recognition. It can focus their ambitions on competitive but ultimately constrained avenues to national power. As it has already done, an order perceived as shared and equitable can strengthen the United States’ hand to enforce norms when and if Moscow violates them. On the other hand, if Moscow can defensibly argue that the postwar order is becoming a biased “American club,” a self-interested tool of U.S. foreign policy, American leverage will fade.

Some will say that the moment for including Russia in any sort of meaningful order has passed. The Obama administration attempted a “reset” of relations, this argument goes, and it failed miserably. Moscow’s recent statements and behavior make clear that the time has come to deter and exclude Russia, not embrace and accommodate it.

There is some truth to this. Russia’s hostility to the West can no longer be denied. But it is hostility born partly of fear, and a suspicion that the United States has used the post–Cold War era to weaken Russia. Like China, it aspires to a respected position within a stable world order, not for the role of hated troublemaker.

To be sure, rebuilding Russia’s involvement in the order will be a thorny challenge. It has become intensely suspicious of Western overtures, but the answer is not across-the-board accommodation. The order’s norms and rules will not survive if the answer is to forgive all of Moscow’s transgressions. And the effort could run aground in particular on issues where Russia’s goals and interests run most directly counter to the norms of the order, such as the self-determination of powers in its near abroad. Yet the task remains urgent, in part because the alternative—an increasingly angry and vulnerable Russia lying outside an order it views as irredeemably hostile—would be far more dangerous to U.S. interests.

Such an effort could make use of renewed dialogues and expanded cooperation on issues of mutual interest. It will demand that the United States step back from active promotion of “color revolutions” and other forms of expansionist value promotion. But perhaps most of all, it will require providing Moscow with a voice in key decisions within the order—at the very time when its behavior in Ukraine and elsewhere tempts the United States to dismiss Russian perspectives. That in turn will call for compromise on a number of issues where U.S. foreign policy has grown accustomed to being uncompromising.

A renewed push to give Moscow a seat at the table of the international order will have to be more limited and gradual than it might have been a decade ago. Putin’s hostility toward the West, and Russia’s recent behavior, rule out any dramatic overtures. But the United States can still find ways to give Russia more status in the order, and accommodate Russian interests where possible—while drawing firm lines where necessary, and doing it all from a position of strength. That task, and the parallel one for China, will surely represent the toughest balancing act to confront the United States in the modern era.



Article Link To The National Interest: