Monday, January 16, 2017

Monday, January 16, Morning Global Market Roundup: Sterling Skids On Brexit Anxiety; Investors Hope For Trump Clarity

By Wayne Cole
January 16, 2017

Sterling slid to three-month lows in Asia on Monday with investors spooked anew by concerns over Britain's divorce from the European Union, while U.S. policy uncertainty lingered ahead of President-elect Donald Trump's inauguration.

Regional share markets were hesitant. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS eased 0.5 percent, Japan's Nikkei .N225 lost 0.6 percent and Shanghai .SSEC shed 1.4 percent.

Spread betters pointed to likely opening gains for UK shares, but a drop for German equities.

All the early action was in currencies where the pound sank as low as $1.1983 GBP=D4, depths not seen since the flash crash of October, having finished around $1.2175 in New York on Friday. It was last down 1.2 percent at $1.2032.

Dealers said the market was reacting in part to a report in the Sunday Times that U.K. Prime Minister Theresa May will use a speech on Tuesday to signal plans for a "hard Brexit", quitting the EU's single market to regain control of Britain's borders.

Investors have been worried such a decisive break from the single market would hurt British exports and drive foreign investment out of the country.

"It is impossible to say by how much a hard Brexit could weaken GBP, but we do not believe that a further 5-10 percent depreciation should be regarded as an extreme scenario when set aside the UK's high dependence on foreign capital," wrote analysts at JPMorgan in a note.

The flight from sterling benefited the safe-haven Japanese yen, with the pound down 1.5 percent to 137.34 yen GBPJPY= while the U.S. dollar dipped to 114.17 JPY=.

Against a basket of currencies, the dollar was up 0.3 percent at 101.510.

The euro pared initial losses to stand at $1.0611 EUR=.

Waiting On Reflation

The dollar index put in its worst weekly performance in more than two months last week as investors reconsidered the whole "reflation" trade - that Trump's promises of debt-funded fiscal spending and lower taxes would stoke inflation and drive the Federal Reserve to raise interest rates faster.

Fed Chair Janet Yellen will have an opportunity to lay out her thinking with speeches on monetary policy scheduled for both Wednesday and Thursday this week.

All eyes will then be on Trump's inauguration on Friday for any clarity on his economic plans.

"The market is showing greater reluctance to push on with reflation-type trades without more details of proposed fiscal spending plans and the economic data to back it up," said analysts at ANZ in a research note.

"It looks as though more than just reasonable data will be needed to see yields and the dollar push higher again. Some decent positive surprises may be necessary for the market to gain conviction."

Asian markets are also waiting anxiously to see if Trump makes good on a campaign pledge to brand Beijing a currency manipulator on his first day in office, and starts to follow up on a threat to slap high tariffs on Chinese goods.

Analysts fret that the specter of deteriorating U.S.-China trade and political ties is likely to weigh on the confidence of exporters and investors worldwide.

Wall Street ended last week mixed, with the Dow .DJIoff slightly but the Nasdaq .IXIC at a record high.

Sentiment this week could be driven by results from the major banks with Morgan Stanley (MS.N), Citibank (C.N) and Bank of New York Mellon (BK.N) among those reporting.

In commodity markets, oil prices inched higher after shedding around 3 percent last week. Brent crude LCOc1 was up 18 cents at $55.63 a barrel, while U.S. crude CLc1 rose 16 cents to $52.51.

Spot gold XAU= added 0.5 percent to $1,203.00 an ounce.

Article Link To Reuters:

Luxottica, Essilor In 46 Billion Euro Merger Deal To Create Eyewear Giant

By Gianluca Semeraro 
January 16, 2017

Italy's Luxottica (LUX.MI) and France's Essilor (ESSI.PA) have agreed a 46-billion euro ($49 billion) merger deal to create a global powerhouse in the eyewear industry, two sources with knowledge of the matter said.

The deal, one of Europe's largest cross-border tie-ups, is expected to be announced before the market opens on Monday. It brings together Luxottica, the world's top spectacles maker with brands such as Oakley and Ray Ban, with Essilor, the world's leading manufacturer of ophthalmic lenses.

The deal will see Luxottica's 81-year old founder, Leonardo Del Vecchio, take a 31 percent stake in the merged group through his family holding Delfin, becoming the biggest shareholder in the company, one of the sources said.

That source described the tie-up as a "merger of equals." Luxottica has a market value of around 24 billion euros, compared to Essilor's 22 billion euros, giving the merged group a combined market capitalization of 46 billion euros.

The two companies' combined revenues totaled nearly 16 billion euros in 2015 and together they employed some 140,000 people.

The second source said the merged group would be headquartered in Paris and listed on the Paris stock exchange.

The fast-growing eyewear market was valued at around $100 billion in 2015, according to U.S.-based market consulting company Grand View Research. It is expected to keep expanding at a healthy pace in coming years because of an aging population as well as increasing awareness about eye care and vision problems, with Latin America and Asia seen as key markets for growth.

The Financial Times reported that Del Vecchio would become executive chairman of the merged group and Essilor’s chairman and chief executive, Hubert Sagnieres, 60, will become executive vice-chairman.

Luxottica has been dogged by management upheaval in recent years, raising questions over Del Vecchio's succession plans and strategy. Some insiders have said a merger could help settle such issues.

Luxottica announced in January 2016 the departure of its third chief executive in 17 months when Adil Mehboob-Khan, a former Procter & Gamble executive, stepped down and Del Vecchio tightened his grip on the group by taking on executive powers.

Long-standing CEO Andrea Guerra quit in 2014 following a rift with Del Vecchio. His successor, Enrico Cavatorta, left after only six weeks into the job, also because of differences with Del Vecchio.

Through Delfin, Del Vecchio, who founded Luxottica in 1961, owns 62 percent of the group, which had revenues of 9 billion euros in 2015, according to Luxottica's website. Fashion designer Giorgio Armani has a 5 percent stake in the Italian group.

Luxottica cut its full-year outlook in July, blaming uncertain markets, as global security threats cloud the outlook for tourism and consumer spending.

The group said in September 2014 that a deal with Essilor had been explored about a year and a half earlier but was not pursued at the time because the right conditions were not in place.

Back then, it cited shareholding governance issues among the reasons why the deal had not gone ahead. In March and April last year, Luxottica denied press reports of a possible tie-up with Essilor and Germany's Carl Zeiss, saying the only relationship it had with the two groups was that they both were among its suppliers.

Article Link To Reuters:

South Korea Prosecutors Accuse Samsung Chief Of Bribery, Seek Arrest

By Ju-min Park and Se Young Lee 
January 16, 2017

South Korea's special prosecutor's office said on Monday it was seeking a warrant to arrest the head of Samsung Group [SAGR.UL], the country's largest conglomerate, accusing him of paying multi-million dollar bribes to a friend of President Park Geun-hye.

Samsung Group chief Jay Y. Lee was questioned for 22 straight hours last week as investigators probed a corruption scandal that resulted in parliament impeaching Park last month.

The special prosecutor's office accused Lee of paying bribes totalling 43 billion won ($36.42 million) Choi Soon-sil, a friend of the president who is the woman at the centre of scandal.

Lee was also accused of embezzlement and perjury in the prosecution's application for an arrest warrant.

Seoul's central district court said a hearing will be held at 10:30 a.m. (0130 GMT) on Wednesday to decide whether to approve the warrant. Samsung did not have an immediate comment.

"The special prosecutor's office, in making this decision to seek an arrest warrant, determined that while the country's economic conditions are important, upholding justice takes precedence," Lee Kyu-chul, a spokesman for the office, told a media briefing.

Prosecutors have been looking into whether Samsung's support for a business and foundations backed by Park's friend Choi may have been connected to the National Pension Service's 2015 decision to support a controversial $8 billion merger of two Samsung Group affiliates.

NPS chairman Moon Hyung-pyo was indicted on Monday on charges of abuse of power and giving false testimony.

Park remains in office but has been stripped of her powers while the Constitutional Court decides whether to make her the country's first democratically elected leader to be forced from office.

Moon was arrested in December after acknowledging ordering the world's third-largest pension fund to support the $8 billion merger in 2015 while he was head of the health ministry, which oversees the NPS.

Samsung has acknowledged providing funds to the three institutions but has repeatedly denied accusations of lobbying to push through the merger.

Choi is accused of colluding with Park to pressure big businesses, including Samsung, to contribute to non-profit foundations backing the president's initiatives.

Choi, in detention and on trial on charges of abuse of power and attempted fraud, again denied wrongdoing on Monday in an appearance at the Constitutional Court.

She also denied having any prior knowledge of the Samsung Group's controversial 2015 merger of two affiliates.

"Even if I knew, I could not have passed on any information because I have no knowledge about mergers or hedge funds, anything like that, in the first place," Choi told the court.

South Korea has been gripped by political crisis for months, with Park impeached in December. Park has also denied wrongdoing, though admitted carelessness in her relationship with Choi.

If the impeachment is upheld by the Constitutional Court, an election would be held in two months, with former U.N. Secretary General Ban Ki-moon expected to be a candidate.

Shares in group flagship Samsung Electronics, the world's top maker of smartphones, flatscreen TVs and memory chips, extended losses on Monday afternoon and were down 2.3 percent.

Article Link To Reuters:

Just How Badly Could Trump’s Threatened 45% Tariff Hurt China?

By Wendy Wu
January 16, 2017

U.S. president-elect Donald Trump's threat to impose a 45 percent tariff on imports from China is no longer being dismissed as mere election rhetoric following his nomination of two prominent China critics as key members of his trade team and the discovery of a long-forgotten presidential power to raise tariffs.

Trump has named Peter Navarro, the author of Death by China, as director of his White House's newly created National Trade Council and fellow China critic Robert Lighthizer as U.S. trade representative.

Meanwhile, former deputy U.S. trade representative John Veroneau, now a lawyer specializing in international trade at the Washington-based law firm Covington & Burling, discovered U.S. presidents have more power to unilaterally raise tariffs than previously thought.

Even though Trump has vowed to pursue a more aggressive trade policy with China, it was previously believed that United States law only allowed a president to unilaterally impose tariffs of up to 15 percent for as long as 150 days.

However, Veroneau and colleague Catherine Gibson wrote in an article on the Law360 legal news website last month that a section of the Tariff Act of 1930 last referred to in 1949 – ironically in relation to China – remained in the statute books and could allow a president to impose tariffs of up to 50 percent and then, if escalation was required, block imports completely.

That raises the stakes enormously, with some economists predicting a halving or worse of Chinese exports to the U.S. – worth US$385.2 billion in 2016 according to the General Administration of Customs – if a 45 percent tariff is introduced.

More importantly, the direct export losses from the imposition of such tariffs would represent only a small part of Beijing's troubles in a trade war against the U.S., with the global trade system that has boosted China's prosperity and economic might over the past two decades unlikely to survive the conflict.

Kevin Lai, research head for Asia excluding Japan with Daiwa Capital Markets, wrote in a research note that punitive tariffs of 45 percent would lead to an 87 percent fall in China's exports to the U.S., while HSBC economists led by Qu Hongbin predicted they would result in a halving of Chinese shipments to the U.S.

The U.S. is China's biggest export market, accounting for 18 percent of total exports, and China's overall exports would be expected to shrink at least 9 percent if Trump carried through with his tariff threat. There would also be significant suffering due to the collapse of businesses and job losses, with Lai estimating that China's gross domestic product could be trimmed by 4.8 percent.

Shen Jianguang, chief Asia economist at Mizuho Securities, estimated that China's exports had created 120 million jobs, including 20 million making products for the US market.

More broadly, a full-blown trade war between Beijing and Washington could encourage other countries to become hostile to Chinese products, thus wrecking China's powerful export machine, warned Professor Yu Miaojie, from Peking University's National School of Development.

"What is more worrying is that other countries may follow suit," he said. "As a result, Chinese exporters may not only lose the U.S. market but also the wider market in advanced countries."

In fact, the European Union, China's second-biggest export market, is also getting increasingly frustrated with a flood of cheap Chinese products and curbs on access to the Chinese market.

Meanwhile, mistrust between Beijing and Tokyo is clouding bilateral trade, and China has raised the prospect trade sanctions on South Korea, such as limiting imports from that country, to express its unhappiness over Seoul's plan to allow a U.S. anti-missile system to be based on its soil.

Trump's threat could significantly undermine China's position as a trade superpower.

China emerged from an economic backwater in the 1980s to become a poster child for economic growth in early 2000s thanks to the country's integration into the global value chain. The country's cheap labor and low-cost inputs, combined with technology and facilities from advanced economies, made it the world's factory.

But the wind is changing. China's overall exports have started to lose momentum in recent years as overseas demand slowed and domestic costs increased, and many manufacturers have left China or are planning to move out.

Fraser Howie, director of Newedge Financial in Singapore and a co-author of Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise, said Trump had the ability to "completely screw a lot of the global trade mechanics" and Beijing found itself being "forced into making on-the-spot decisions in response to events".

The Chinese government has not responded directly to Trump's trade threats, although Beijing is quietly considering possible retaliatory measures against the U.S. if a trade war breaks out, including targeting well-known U.S. companies with tax or antitrust probes, according to a Bloomberg report.

On the surface, the Chinese government is trumpeting the virtues of free trade. Finance Vice-Minister Zhu Guangyao said last month there would be no winner in a trade war between China and the US, and the damage would spill over to the rest of the world.

However, after Trump nominated Lighthizer as his US trade representative, the Beijing-based Global Times, a tabloid published by the People's Daily group, carried an editorial that warned there were "big sticks" waiting for Trump behind the doors of China's Ministry of Commerce.

To be fair, bilateral trade between world's No 1 and No 2 economies has always been a quarrelsome affair, with clashes over everything from poultry to hi-tech products. According to calculations by Capital Economics, a London-based consultancy, the US currently applies anti-dumping penalties to 102 Chinese products and China does the same to 34 US products.

Some observers said they still expected Trump's threat to impose a 45 percent tariff on all Chinese products would turn out to be a bluff, designed to increase his leverage in negotiations.

Henry Chan Hing Lee, an adjunct research fellow at the National University of Singapore, said he expected Trump would continue to test China's bottom line and the game of "pushing things to the brink" would only stop when domestic opposition rose in the US.

Jin Baisong, a researcher with a Ministry of Commerce think tank, said China might offer to buy more US products to help Trump's plan of boosting US exports and creating more US jobs.

"China is willing to buy more," Jin said. "Why not sit down to have a talk?"

Article Link To CNBC:

U.S. Profit Growth Pickup Could Justify Wall Street Rally

By Caroline Valetkevitch
January 16, 2017

U.S. companies are set to report their strongest profit growth in two years, which could go a long way toward justifying Wall Street's record-breaking rally, say stock investors who anticipate many companies will top expectations.

Fresh from a year-long decline in quarterly profits, companies in the benchmark S&P 500 .SPX are expected to report their bottom lines grew by 6.2 percent in the fourth quarter, the latest Thomson Reuters data shows, the strongest growth since a 7.0 percent increase in the same quarter of 2014.

By most measures, the last quarter was a solid one for the wider U.S. economy. One key measure of health of the manufacturing sector, the Institute for Supply Management's (ISM) monthly purchasing managers' index, recently hit its highest level in two years, and the global economic outlook has improved as well.

At the same time, the number of fourth-quarter corporate outlooks above analysts' expectations is at the most they have been in years.

As a result, some strategists say, investors may see a larger-than-usual number of companies posting results that beat Wall Street's estimates in the weeks ahead.

"There's actually some positive momentum here in the fourth quarter. ... Wouldn't it be logical to assume that you'd also see that coming through in your corporate activity?" said RBC Capital Markets Chief Equity Strategist Jonathan Golub, who thinks current profit estimates do not fully reflect the economic improvement.

Results also will benefit from "easy comparisons" with year-ago numbers, said Richard Bernstein, chief executive and chief investment officer of Richard Bernstein Advisors in New York.

To view a graphic on S&P 500 profit growth rates and guidance, click

Momentum For Stocks

A substantial upside surprise to reported profits could provide more momentum for a stock market that has been on fire since the election of Donald Trump in November, and dampen worries that stocks are due for a pullback.

The rally to record highs for all three U.S. major stock indexes has pushed price-to-earnings multiples – a main valuation measure for equities – to their highest levels in a decade and well above historic norms.

The S&P 500 is trading at 17.1 times forward earnings, well above the long-term average of 15, Thomson Reuters data shows.

"It will move away some of the concerns that the market has moved too far, too fast," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.

"Beating the Street" is a game most investors are aware of. More than 60 percent of corporate profit reports top analysts' estimates on average, even in down times, but data from RBC Capital Markets showed that percentage climbs to 70 percent or higher when the ISM index - which indicates growth when it rises above 50 - reaches into the mid-50s, where it is now.

According to Thomson Reuters data, S&P 500 companies have given or updated earnings guidance that was better than analysts' expectations 41 times so far for the fourth quarter, which is about 28 percent more than a year ago and the most since 2011.

Conversely, companies have given guidance below analysts' expectations 83 times for the quarter, down by about 15 percent from a year ago. Companies typically guide below expectations in any given quarter.

While a good chunk of those 41 companies said they expected cost cuts, restructuring or layoffs to improve their bottom-line numbers, some cited an improvement in conditions, a Reuters analysis of the outlooks showed.

For example, in November, the chief financial officer of railroad operator CSX (CSX.O), Frank Lonegro, said in a statement the company expects fourth-quarter earnings to be flat to slightly up, "as macroeconomic headwinds impacting the company's volume are moderating."

One big worry would be if the dollar continues to strengthen, which would dampen sales of U.S. multinationals, strategists said. The U.S. dollar index .DXY jumped 7.1 percent in the 2016 fourth quarter.

"That could be a monkey wrench in this whole story," said Bernstein. But "if the dollar stays stable - even if the dollar appreciates a little bit - earnings are going to improve in 2017."

Article Link To Reuters:

Oil Prices Will Be Much More Volatile In 2017: IEA

By Nawied Jabarkhyl and Maha El Dahan 
January 16, 2017

Global oil prices will witness "much more volatility" in 2017 even though markets may rebalance in the first half of the year if output cuts pledged by producers are implemented, the head of the International Energy Agency (IEA) said on Sunday.

The Organization of the Petroleum Exporting Countries (OPEC) agreed on Nov. 30 to cut output by 1.2 million bpd to 32.5 million bpd for the first six months of 2017, in addition to 558,000 bpd of cuts agreed by independent producers such as Russia, Oman and Mexico.

"I would expect that we will see a rebalancing of the markets within the first half of this year," said Fatih Birol, executive director of IEA, the Paris-based global energy watchdog.

"But what I want to say (is) that we are entering a period of much more volatility in the market ... the name of the game is volatility," he told Reuters Television in Abu Dhabi.

Prices fell on Friday and ended the week 3 percent lower on lingering doubts over the extent of OPEC cuts, with sentiment worsened by concerns over the economic health of the world's second-largest oil consumer, China, after it reported the steepest falls in overall exports since 2009. [O/R]

Birol said although the OPEC agreement could signal higher oil prices, it would also encourage more production from the United States and elsewhere. Higher prices could also weaken global demand for oil, he added.

"I expect the U.S. shale oil will go back to increasing production this year," Birol said.

He added that a recent trend of declining Chinese oil production due to low prices could be reversed if the market strengthened.

Data from the U.S. Energy Information Administration showed crude production rose notably last week, particularly in 48 southern states. Overall production was 8.95 million barrels per day (bpd) last week, the most since April of last year. EIA/S

OPEC and the independent producers are cutting supplies to remove a global glut and prop up prices, which at around $56 a barrel are half their level of mid-2014, hurting the revenue of exporting nations.

Birol said his main concern now was lack of investment in new oil supplies after low prices over the past two years forced the shutdown of many projects across the world.

"This year, if there are no major investments coming we may well see in a few years from now significant supply-demand gap with serious implications on the market."

Article Link To Reuters:

Oil Prices Edge Up On Weaker Dollar, Expected Crude Output Cuts

By Henning Gloystein
January 16, 2017

Oil prices inched up on Monday, supported by a weaker dollar and expectations that OPEC and other producers will cut output as part of a deal to curb global oversupply.

Brent crude futures LCOc1, the international benchmark for oil prices, were trading at $55.64 per barrel, up 19 cents from their last close.

U.S. West Texas Intermediate (WTI) crude futures were up 17 cents at $52.54 a barrel.

Traders said that prices were buoyed by a weakening dollar, which makes fuel purchases cheaper for countries that use other currencies domestically, potentially spurring demand.

After spending much of the second half of 2016 in an upward trend, the dollar has fallen around 2.5 percent against a basket of other leading currencies .DXY since its early-January peak.

The greenback is in particular focus for international investors this week as Donald Trump is set to take office as the next U.S. president on Friday.

"Oil pricing will be driven this week by the movement of the U.S. dollar rather than crude itself, with President-elect Trump's inauguration ... being the main event," said Jeffrey Halley, a senior market analyst at OANDA brokerage in Singapore.

Oil also continued to receive support from an announced crude output cut from major producers including the Organization of the Petroleum Exporting Countries (OPEC) and Russia.

OPEC has said it would reduce its output by 1.2 million barrels per day to 32.5 million bpd from Jan. 1, and Russia as well as other non-OPEC members are planning to cut about half as much.

However, there is a broad expectation that OPEC will not fully implement its announced cuts, although compliance estimates of 50 to 80 percent are enough to keep crude prices supported in the mid-$50s per barrel, traders said.

Rising oil output in the United States has prevented crude prices from climbing further.

Despite a small dip in drilling last week, Goldman Sachs said it expected year-on-year U.S. oil production to rise by 235,000 barrels per day (bpd) in 2017, taking into account estimates of wells that have been drilled and are likely to start producing in the first half of the year.

Overall U.S. oil output stands at 8.95 million bpd, up from less than 8.5 million bpd in June last year and back at similar levels to 2014, when OPEC decided to start a price war against U.S. shale producers and sent the market into a tailspin.

Article Link To Reuters:

How Electric Vehicles Could End Car Ownership As We Know It

'Rideables’ are likely to speed up adoption of self-driving technology, turn transportation into a service.

By Christopher Mims
The Wall Street Journal
January 16, 2017

If I say “personal electric vehicle,” you might think “Paul Blart: Mall Cop,” or maybe “exploding hoverboards.” You don’t think global transportation revolution.

But in the past few years, with the convergence of better battery technology, lighter materials and smaller, more powerful electric motors, entirely new kinds of transportation have bloomed. The electric powertrain, unlike that of the internal combustion engine, scales smoothly from tiny to huge, powering everything from 10-pound electric skateboards to 20-ton electric buses.

This Cambrian explosion of new vehicles enables two other revolutions: self-driving technology, and the shift from vehicle ownership to transportation as a service.

Taken together, these forces have the potential to transform our way of life as much as Ford Motor Co.’s Model T did over a century ago. As the convenience and safety of electric, autonomous ride-hailing services appeals increasingly to the masses, the nature of network optimization means it will probably make sense for the Ubers and Lyfts of the world to cater to our needs with everything from a one-seater to a party barge. It may also mean you’ll use your garage for something other than a car.

That has, of course, been the promise of electric vehicles going back to General Motors Co.’s EV-1 and Toyota Motor Corp.’s original electric RAV4. And before there were “rideables,” vehicles so small they qualify as consumer electronics, there was Dean Kamen’s battery-powered, two-wheeled Segway.

The transformation might not come about this time, either. Enormous problems of both infrastructure and battery technology have yet to be solved.

But makers of electric vehicles, or EVs, are already overcoming big obstacles. Among other things, the rapid expansion of the market has led to demand for parts, making them in turn cheaper and more available, much like what happened with mobile phones.

Those trends were in evidence at this year’s CES tech show in Las Vegas. The avalanche of rideables included models that are lighter and more powerful than ever before. There were electric one-wheelers and skateboards, scooters of every description and a dizzying array of bikes. They are what urban planners call “last mile” transportation—they can be lugged on mass transit and are particularly useful over short distances in dense cities.

They might look like the skateboards, bikes and scooters of old, but between beginner-friendly features, advanced motors and speeds as high as 20 miles per hour, they can eliminate challenges that kept people away from their manual predecessors.

Mobility, as much as fun, is the reason the Swagtron Swagger electric scooter is made from carbon fiber and weighs just 17 pounds, but has a range of 15 miles and a top speed of 15 mph, says a company spokesman. At $400, it costs the same as a decent bicycle, and it doesn’t ask you to break a sweat.

Then there are the car replacements. They include electric scooters such as Mahindra Group’s GenZe 2.0, which has a removable, rechargeable battery, and the Gogoro Smartscooter, which goes from zero to 31 mph in 4.2 seconds and has a top speed of 60 mph.

The three-wheeled Arcimoto SRK rolls off an assembly line in Eugene, Ore. this spring. An enclosed vehicle that qualifies as a motorcycle, it has an $11,900 price tag that is intended to appeal to second-car buyers. Toyota’s three-wheeled i-Road concept vehicle is aimed at the same market, as is Renault’s Twizy, which looks like a souped-up golf cart.

In 2015, cars became a bigger consumer of lithium-ion batteries, by dollar value, than any other device. As a result, “batteries are getting cheaper at 4% to 8% a year, and that compounding over the last 5 years has had a massive impact” on the electric-vehicle industry, says Ryan Popple, chief executive of electric-bus maker Proterra. The company sold more than 200 buses to cities throughout the U.S. in 2016.

The same market forces have made lightweight composite materials—formerly an exotic luxury affordable only to makers of aircraft and wind turbines— accessible now to pretty much any EV maker. Giving an EV good range and acceleration is as much about making it lighter as it is about adding more batteries. Carbon fiber is as vital to a Swagtron scooter as it is to BMW’s $140,000 i8 electric sports car, and even Proterra’s buses.

Many new electric vehicles are designed with autonomy in mind. Proterra’s buses can automatically dock themselves to charging stations. Danny Shapiro, senior director of automotive at chip maker Nvidia, says shuttle buses and similar transit are likely to be the first fully autonomous electric vehicles, because they operate under a limited range of conditions, on predictable routes and often on private property.

Arcimoto’s vehicles will be “autonomous-capable from day one,” says company president Mark Frohnmayer, whose long-term vision is to provide self-driving vehicles for car fleets that complement mass transit.

As Uber, Lyft and their international competitors push toward their goal of fully autonomous ride-hailing services—the end of car ownership, for many people—EVs take center stage for a number of reasons. First, there’s a fuel-cost savings as electric cars approach cost parity with conventional ones. Second, electric vehicles are easier to refuel safely in an automated way. And third, car companies simply aren’t much interested in building their next-generation technology on the internal-combustion engine, a platform that isn’t long for this world in light-duty vehicles.

Right now, makers of electric vehicles are taking a huge risk, a build-it-and-hopefully-they-will-come approach. But in 10 years, the very notion that a car must be a 3,000-pound gas-guzzling beast will seem as quaint as the notion that bike lanes are only for human-powered two-wheelers.

What stands in the way are two equally challenging obstacles: consumers’ mind-sets and the existing transportation infrastructure.

Because of this, the EV revolution may have greater impact beyond U.S. borders. Arcimoto’s Mr. Frohnmayer says he anticipates the U.S. will be one of the toughest markets for his company. China, India, even Europe all have denser cities, lower rates of car ownership, worse problems with pollution and a general need for more small, light, emissions-free transportation at a total cost of ownership lower than the typical car.

And unfortunately, while the resulting transportation system promises to be more environmentally friendly, efficient and yes, even fun, there probably won’t be less traffic. “I almost can’t hold my laughter when people say autonomous vehicles will eliminate traffic,” Proterra’s Mr. Popple says.

Article Link To The Wall Street Journal:

Trump Could Actually Be Good For The Environment

By Cheang Ming
January 16, 2017

The Trump administration might be sceptical on the phenomenon of global warming but the President-elect's infrastructure policies could in fact have a positive impact on the environment, according to an asset manager.

Since his Nov. 8 election win, President-elect Trump has riled environmentalists by appointing a critic of the Environmental Protection Agency to head the agency, calling for the deregulation of oil exploration and threatening to withdraw from the historic COP21 Paris Agreement that aims to limit the increase in global average temperatures .

However, the president-elect's infrastructure expenditure plans to boost domestic growth will also benefit environmental sector businesses in the U.S., said Ian Simm, CEO of Impax Asset Management, a firm specializing in investment solutions that address environmental concerns and resource scarcity.

"Trump is very keen on bringing more economic growth back to the United States. More industrial activity is very good for companies that are solving environmental problems, (including) cleaning up the water supply from fracking water, air quality and pollution," Simm told CNBC's "Squawkbox."

The other reason? Sitting out from participation in the environmental revolution could be a loss to the U.S. in terms of political and economic clout.

Despite its early resistance to carbon emissions limits, China has recently become a major advocate of climate change, Reuters reported. The world's second largest economy is poised to take on a leadership role in tackling global environmental issues should the U.S. withdraw from the international stage.

"The (Paris) climate change agreement is one of the biggest stories of the next decade," Simm said.

"We're going to be completely transforming our economy in terms of power generation, heating our homes, transportation. If the United States sits on the sidelines, it's going to miss out on massive opportunities…(which would be) completely opposite of what Trump's trying to achieve," Simm added.

As for the Trump administration's contradictory stance on COP21, Simm said that there was no way for the president-elect to overturn the deal. Despite initially saying that he would pull out of the Paris Agreement, the president-elect later backtracked on his promise and said that he would keep an "open mind" instead.

"The Paris Agreement has been ratified. It's been agreed (on) globally. It's a commitment," Simm said, "The President-elect, when he becomes President, may actually try to slow things down in terms of implementing policy in the United States but he can't overturn the deal. That's not possible."

Article Link To CNBC:

Why Goldman Sachs Sees Only 90 Good Days For U.S. Stocks In 2017

Market Too Optimistic On Trump’s Tax Reforms, Bank’s David Kostin Says

By Sara Sjolin
January 16, 2017

U.S. stocks have had an incredible run over the last two months and even at these record-breaking levels there are still profits to make — at least until March, when it will be time to run for the hills.

That’s a key message from Goldman Sachs chief U.S. equity strategist David Kostin, who says optimism over expected tax reforms from the Trump administration is likely to push the S&P 500 index SPX, +0.18% to 2,400 by the end of the first quarter. That implies a 6% upside from current levels and a 12% jump from just before Donald Trump won the presidential election in November.

“How to make money investing in a market that is generally highly valued? The path of the market suggests you need to make money in the first 90 days of this year,” Kostin said at a conference in London on Monday. “The key driver is the idea that there’ll be these corporate tax reforms.”

But investors are too optimistic when it comes to how low Trump can actually cut taxes and that will scupper the rally from the second quarter, Kostin warned.

“My expectation is that investors are giving more credence to the idea of tax reform than perhaps what is ultimately going to take place,” Kostin added.

“The debate over the federal deficit is going to kick off in March and there’ll be recognition that if all these proposals were to go through, there would be a significant increase in the size of the deficit. It’s not clear that could go through Congress,” he said.

Investors could get more clarity on Trump’s tax plans when he hosts his first press conference since July on Wednesday.

Trump has proposed to cut corporate taxes to around 15% from the current 35%. While that is seen as boosting company earnings, the federal deficit could balloon by 60% and reach $1 trillion in 2017, according to Goldman. The deficit stood around $600 billion in 2016.

“The deficit creates some limitations on how much of that can implemented. So maybe at the end of the day, the earnings revisions are not as significant as some of the investors now think,” Kostin said.

After peaking at 2,400 in March, Goldman expects the S&P to end 2017 around 2,300.

Kostin stressed, however, that he does expect Trump to succeed with some tax reforms, which should benefit companies that pay the highest effective tax rates. In a December research note, Goldman mentioned CarMax Inc. KMX, +0.54% , Monster Beverage Corp. MNST, +3.25% , Hess Corp. HES, +0.07% and Charles Schwab Corp. SCHW, +0.36% as companies that are likely to benefit.

Article Link To MarketWatch:

The Bond Market Isn't Dead Yet For This JPMorgan Fund

Fund returned 8.2% in past year, double its benchmark; Emerging markets offer opportunities, fund manager says.

By Lilian Karunungan
January 16, 2017

Don’t count your nails yet for the bond market’s coffin.

That’s the message from a JPMorgan Asset Management fund that’s outperformed in the past year by keeping to shorter-maturity securities. The $2.4 billion Global Bond Opportunities Fund has reduced its average duration in U.S. securities to three years from more than five in July, and has jumped into the domestic debt of Brazil and Russia, two higher-yielding emerging markets that have avoided the recent exchange-rate depreciation afflicting Turkey and Mexico.

“There’s still life in fixed income -- but it’s a question of what sort of fixed income we invest in,” said Iain Stealey, a London-based managing director who helps oversee $1.77 trillion globally at the firm. “Over the course of this year, we do feel we’re going to see higher core government rates whether it’s the U.S. or Europe," he said in an interview in Singapore last week.

Bond investors have been navigating dangerous shoals since the global-reflation trades that caught fire after the November U.S. presidential election victory for a fiscal-stimulus pledging Donald Trump. While the growth enthusiasm has ebbed in recent weeks, some are warning of the potential for more pain this year.

For Stealey’s fund, the question is how to build on a 8.2 percent return in the past year, based on data compiled by Bloomberg, that’s been double the 3.9 percent gain in its underlying benchmark, the Bloomberg Barclays Multiverse Index.

The fund’s recent strategy:

--Began buying back emerging-market debt since mid-December after the resurgent dollar showed some stability

-- Mix of both local currency and dollar-denominated emerging-market bonds have been raised to 15 percent of the portfolio from 12 percent, still below the 17 percent allocation before the U.S. election

--Increased holdings of U.S. high-yield bonds as these benefit from a stronger economy

The company is positive on the local-currency bonds of Brazil and Russia as their economies are seen rebounding, Stealey said. The domestic debt issued by the two countries returned 4.9 percent and 2.3 percent respectively in the past month as of Jan. 13, indexes compiled by Bloomberg show. Brazil’s 10-year notes offer a yield of about 11 percent and Russia’s around 8 percent, compared with about 2.4 percent for similar-maturity U.S. debt. The benchmark yield in the U.S. will likely rise to as high as 3.5 percent by the end of the year, Stealey forecast.

Brazil’s change in president should be “positive” for the country, Latin America’s biggest economy, Stealey said. Russia, the world’s largest energy exporter, will benefit from a rebound in oil prices and the incoming U.S. administration’s more favorable stance could lead to a “toning down of sanctions,” he said.

“When we go through fundamental quantitative analysis on emerging markets as a whole, there’s reason to be optimistic,” he said. “There are selections of emerging markets where there are still opportunities. Stronger global growth looks like it’s coming, which should be good for all forms of credit globally.”

Article Link To Bloomberg:

Millions Of Workers Willing To Quit Jobs To Join Trump Economy

By John Aidan Byrne
The New York Post
January 16, 2017

Here comes the Trump labor rally, firing on all cylinders — more jobs everywhere, and millions of US workers ready to quit for more pay and better employment opportunities, according to some analysts.

Despite December job gains gains coming in below expectations — at 156,000 — the hottest US labor market in a decade is being ignited by the incoming administration in Washington. As many as 3 million American employees forecast to voluntarily quit their current jobs in January alone, according to analyst projections.

That’s the largest January number expected to walk off the job since 2007 — an undoubted sign of more jobs waiting out there, the analysts say.

Of course, how long this pent-up Trump labor rally will persist is debatable, they add, but evidence of a renewed surge of jobs and turnover is mounting.

“You are going to have an exceptionally strong labor market this quarter — and the historical data supports this trend — backed at least by the perception that this new administration is going to create more of a friendly economic environment that will foster business growth,” according to David Lewis, chief executive of OperationsInc, one of the Northeast’s largest human resources outsourcing and consulting firms.

“And I would argue that this ‘quit’ data is one of the strongest leading indicators, a sign of strong job market confidence,” he said.

Lewis expects the “quit” numbers, compiled by the Bureau of Labor Statistics, to keep surging through the first quarter, as more workers, disgruntled by a decade of meager or no pay raises, are lured by other employers on hiring sprees with promises of higher compensation.

Recruiters and job Web sites already report a jump in new openings. “You can’t find the talented people to fill the positions that exist, and I have been doing this 40 years,” said Charles Muratore, a headhunter based in Manhattan.

The first quarter could see many unhappy campers ratcheting up pressure for higher pay, and a flight of talent foreshadowed by this mass exodus in January, as record numbers accept other work for higher comp in industries with strong job openings, said Lewis, a human resources professional who has closely studied the “quit” data during his 30-year career.

Already, average hourly earnings ticked up in December by 0.4 percent, according to the Labor Department jobs report released Jan. 6.

“Employees have been unhappy in terms of pay raises, bonuses or promotions — so that either motivates them into the market for better-paying jobs, or in many cases they have been motivated for months but are just waiting for their bonuses,” Lewis told The Post. “You haven’t, until now, been hearing a lot of companies say, ‘Hey, we’re going to give our employees 6, 7 or 8 percent increases’ — raises are still around the 3 percent level.”

Lewis predicts between 2.1 million and 3 million workers will resign in January — as much as 50 percent more than at the depths of the Great Recession in 2010, when some 1.6 million workers quit.

Evidence of this more-frenzied labor market also came in the wake of Donald Trump’s election victory. A BLS report released last month noted how the number of unemployed persons per job opening was at 1.9 back in December 2007, a ratio that peaked in July 2009 to 6.6 unemployed persons per job opening.

The ratio has since leveled off and remains between 1.3 and 1.4. “Look up the postings at some of the biggest US corporations — they are having a hard time filling the jobs,” Muratore said.

Lewis said present signs point to unemployment taking a dip from 4.7 percent nationwide to settle at near or at 4 percent, on the back of stronger gross domestic product.

“We have the Trump version of friendly economic policies — but we have to make some assumptions too. If, for example, Trump tees off China in the morning and we can have an international crisis, then all bets are off,” Lewis said.

Article Link To The New York Post:

Brexit To Hit UK Harder Than Rest Of Europe

By Elzio Barreto and Julie Zhu
January 16, 2017

Britain's decision to leave the European Union would have a bigger effect on the United Kingdom than the rest of Europe, as political and economic uncertainties grow around the world, the head of the euro zone bailout fund said on Monday.

Brexit is among a series of events, including elections this year in Netherlands, France and Germany, that has increased uncertainties, Klaus Regling, managing director of the European Stability Mechanism (ESM), said in a speech in Hong Kong.

"The rise of populism, not only in Europe but also in the United States, questions the post war economic order that has brought unprecedented prosperity and reduction in poverty," Regling said at the Asia Financial Forum.

"As an economist I'm worried at the future of world trade, cross border cooperation, and the role of international institutions."

Still, he said the economic situation in Europe has been improving, with unemployment declining and economies including Spain and Ireland expanding.

"Brexit is a disruptive event though I believe it's a bigger problem... for the UK than the rest of Europe.

Article Link To Reuters:

World's Eight Richest Individuals As Wealthy As Half Of Humanity

By Ben Hirschler
January 16, 2017

Just eight individuals, all men, own as much wealth as the poorest half of the world's population, Oxfam said on Monday in a report calling for action to curtail rewards for those at the top.

As decision makers and many of the super-rich gather for this week's World Economic Forum (WEF) annual meeting in Davos, the charity's report suggests the wealth gap is wider than ever, with new data for China and India indicating that the poorest half of the world owns less than previously estimated.

Oxfam, which described the gap as "obscene", said if the new data had been available before, it would have shown that in 2016 nine people owned the same as the 3.6 billion who make up the poorest half of humanity, rather than 62 estimated at the time.

In 2010, by comparison, it took the combined assets of the 43 richest people to equal the wealth of the poorest 50 percent, according to the latest calculations.

Inequality has moved up the agenda in recent years, with the head of the International Monetary Fund and the Pope among those warning of its corrosive effects, while resentment of elites has helped fuel an upsurge in populist politics.

Concern about the issue was highlighted again in the WEF's own global risks report last week.

"We see a lot of hand-wringing - and clearly Trump's victory and Brexit gives that new impetus this year - but there is a lack of concrete alternatives to business as usual," said Max Lawson, Oxfam's head of policy.

"There are different ways of running capitalism that could be much, much more beneficial to the majority of people."

Super-Charged Capitalism

Oxfam called in its report for a crackdown on tax dodging and a shift away from "super-charged" shareholder capitalism that pays out disproportionately to the rich.

While many workers struggle with stagnating incomes, the wealth of the super-rich has increased by an average of 11 percent a year since 2009.

Bill Gates, the world's richest man who is a regular at Davos, has seen his fortune rise by 50 percent or $25 billion since announcing plans to leave Microsoft in 2006, despite his efforts to give much of it away.

While Gates exemplifies how outsized wealth can be recycled to help the poor, Oxfam believes such "big philanthropy" does not address the fundamental problem.

"If billionaires choose to give their money away then that is a good thing. But inequality matters and you cannot have a system where billionaires are systematically paying lower rates of tax than their secretary or cleaner," Lawson said.

Oxfam bases its calculations on data from Swiss bank Credit Suisse and Forbes. The eight individuals named in the report are Gates, Inditex founder Amancio Ortega, veteran investor Warren Buffett, Mexico's Carlos Slim, Amazon boss Jeff Bezos, Facebook's Mark Zuckerberg, Oracle's Larry Ellison and former New York City mayor Michael Bloomberg.

Article Link To Reuters:

Davos Elites Struggle For Answers As Trump Era Dawns

By Noah Barkin
January 16, 2017

The global economy is in better shape than it's been in years. Stock markets are booming, oil prices are on the rise again and the risks of a rapid economic slowdown in China, a major source of concern a year ago, have eased.

And yet, as political leaders, CEOs and top bankers make their annual trek up the Swiss Alps to the World Economic Forum in Davos, the mood is anything but celebratory.

Beneath the veneer of optimism over the economic outlook lurks acute anxiety about an increasingly toxic political climate and a deep sense of uncertainty surrounding the U.S. presidency of Donald Trump, who will be inaugurated on the final day of the forum.

Last year, the consensus here was that Trump had no chance of being elected. His victory, less than half a year after Britain voted to leave the European Union, was a slap at the principles that elites in Davos have long held dear, from globalization and free trade to multilateralism.

Trump is the poster child for a new strain of populism that is spreading across the developed world and threatening the post-war liberal democratic order. With elections looming in the Netherlands, France, Germany, and possibly Italy, this year, the nervousness among Davos attendees is palpable.

"Regardless of how you view Trump and his positions, his election has led to a deep, deep sense of uncertainty and that will cast a long shadow over Davos," said Jean-Marie Guehenno, CEO of International Crisis Group, a conflict resolution think-tank.

Moises Naim of the Carnegie Endowment for International Peace was even more blunt: "There is a consensus that something huge is going on, global and in many respects unprecedented. But we don't know what the causes are, nor how to deal with it."

The titles of the discussion panels at the WEF, which runs from Jan. 17-20, evoke the unsettling new landscape. Among them are "Squeezed and Angry: How to Fix the Middle Class Crisis", "Politics of Fear or Rebellion of the Forgotten?", "Tolerance at the Tipping Point?" and "The Post-EU Era".

The list of leaders attending this year is also telling. The star attraction will be Xi Jinping, the first Chinese president ever to attend Davos. His presence is being seen as a sign of Beijing's growing weight in the world at a time when Trump is promising a more insular, "America first" approach and Europe is pre-occupied with its own troubles, from Brexit to terrorism.

British Prime Minister Theresa May, who has the thorny task of taking her country out of the EU, will also be there. But Germany's Angela Merkel, a Davos regular whose reputation for steady, principled leadership would have fit well with the WEF's main theme of "Responsive and Responsible Leadership", will not.

'Rejoicing In The Elevators'

Perhaps the central question in Davos, a four-day affair of panel discussions, lunches and cocktail parties that delve into subjects as diverse as terrorism, artificial intelligence and wellness, is whether leaders can agree on the root causes of public anger and begin to articulate a response.

A WEF report on global risks released before Davos highlighted "diminishing public trust in institutions" and noted that rebuilding faith in the political process and leaders would be a "difficult task".

Guy Standing, the author of several books on the new "precariat", a class of people who lack job security and reliable earnings, believes more people are coming around to the idea that free-market capitalism needs to be overhauled, including those that have benefited most from it.

"The mainstream corporate types don't want Trump and far-right authoritarians," said Standing, who has been invited to Davos for the first time. "They want a sustainable global economy in which they can do business. More and more of them are sensible enough to realize that they have overreached."

But Ian Bremmer, president of U.S.-based political risk consultancy Eurasia Group, is not so sure.

He recounted a recent trip to Goldman Sachs headquarters in New York where he saw bankers "rejoicing in the elevators" at the surge in stock markets and the prospect of tax cuts and deregulation under Trump. Both Goldman CEO Lloyd Blankfein and his JP Morgan counterpart Jamie Dimon will be in Davos.

"If you want to find people who are going to rally together and say capitalism is fundamentally broken, Davos is not the place to go," Bremmer said.

Pace Of Change

Suma Chakrabarti, president of the European Bank for Reconstruction and Development (EBRD), believes a "modern version of globalization" is possible but acknowledges it will take time to emerge.

"It is going to be a long haul in persuading a lot of people that there is a different approach. But you don't have to throw the baby out with the bath water," he told Reuters.

Still, some attendees worry that the pace of technological change and the integrated, complex nature of the global economy have made it more difficult for leaders to shape and control events, let alone reconfigure the global system.

The global financial crisis of 2008/9 and the migrant crisis of 2015/16 exposed the impotence of politicians, deepening public disillusion and pushing people towards populists who offered simple explanations and solutions.

The problem, says Ian Goldin, an expert on globalization and development at the University of Oxford, is that on many of the most important issues, from climate change to financial regulation, only multilateral cooperation can deliver results. And this is precisely what the populists reject.

"The state of global politics is worse than it's been in a long time," said Goldin. "At a time when we need more coordination to tackle issues like climate change and other systemic risks, we are getting more and more insular."

Article Link To Reuters:

Theresa May Must Commit To Single Market In Her Brexit Speech

The prime minister must pledge to do the right thing for British businesses and workers.

The Guardian
January 16, 2017

On Tuesday, the prime minister will give a speech on Brexit. It is another chance for her to spell out what her government is hoping to achieve in the negotiations.

The stakes are high and difficult judgment calls will have to be made. But time is running out. The phrases “Brexit means Brexit” and “There will be no running commentary” are well past their sell-by date. Where there is uncertainty, we now need clarity.

No one expects the prime minister to disclose details on Tuesday that could reasonably be judged to damage the UK in the article 50 negotiations. But, equally, no one buys the argument that disclosure of the government’s basic approach to the big-ticket items such as the single market, the customs union and transitional arrangements would have any harmful effect, apart, of course, from discomforting those Tory MPs who would feel betrayed on learning that their preferred direction is not shared by the government.

So what should the prime minister say?

First, she should rule out hard Brexit.

Leaving the EU without a preferential trade arrangement in place would make the UK significantly poorer. That would leave us outside and shut off from the European market of 500 million people who could buy our products and services. Reverting to World Trade Organisation rules should not be contemplated. As the CBI has said, that “would do serious and lasting damage to the UK economy and those of our trading partners”.

Such an approach would not only put our economy and jobs at risk, but would abandon our shared scientific, educational and cultural endeavours with the EU and jeopardise our collaboration on policing and security.

By ruling out this version of Brexit, the prime minister would calm nerves and reassure businesses.

But she needs to go much further than that. Having spent the past three months travelling the length and breadth of the UK talking to communities, workers, trade unionists, industry representatives and hundreds of businesses large and small, I have a clear view of their needs and concerns. And when it comes to trade, they are relatively straight forward: no drop in the ability of businesses in the UK to trade successfully with our EU partners.

They want the prime minister to fight for them as hard as she has promised to fight for Nissan. On 31 October 2016, the business secretary, Greg Clark, told the Commons that the government had reassured Nissan that it would seek trading arrangements that are “free of tariffs” and “unencumbered by impediments”. The prime minister now needs unequivocally to extend that commitment to all businesses, whether trading in goods or services. She also needs to demonstrate she understands the importance of “equivalence” in the regulated sectors. Labour is demanding nothing less. The economy and jobs must come first.

The fact that changes to the way freedom of movement rules operate in the UK will have to be part of the article 50 negotiations makes the government’s job more difficult. But we are entitled to expect the prime minister to fight hard for the best deal for our country. And the negotiations will take place during a period of considerable challenge and change for Europe itself.

Labour has consistently emphasised the importance and benefits of the single market. But it now seems highly likely that the prime minister will signal on Tuesday that she is giving up on membership. If she thinks that lowering expectations will help her in the long run, she is mistaken.

Full access to the single market is what businesses and trade unions want. If the prime minister is going down the route of a bespoke trade agreement, Labour will demand that she spells out how such an agreement would be comprehensive enough to ensure that the benefits of the single market – trading “free of tariffs” and “unencumbered by impediments” – are matched. Warm words are not enough.

The government must be open enough to provide robust impact assessments of leaving the single market or the customs union, including region-by-region and sector-by-sector analysis.

They must also be honest enough to acknowledge that any fully comprehensive trade agreement is likely to require transitional arrangements and outline what will happen in the interim to our EU contributions and to our role in negotiating new regulations.

The prime minister also needs to clear up other uncertainties. EU citizens living in the UK and UK citizens living in Europe urgently need reassurance. Their status should be sorted out before article 50 is triggered; their rights should not be a bargaining chip in the negotiations.

Equally, the prime minister needs to indicate that she will fight for a new relationship with the EU that values and maintains our joint scientific, educational and cultural work with our EU partners; that guarantees our continued co-operation in the fight against organised crime and terrorism; and that allows the UK to retain its leading position in the world, influencing and contributing to developments across Europe and beyond.

These are Labour’s demands. They are also the demands of the country. They need to be in the prime minister’s speech; they need to be in the government’s plan for Brexit.

To ensure that is the case, parliament should have a vote on the article 50 agreement that is reached at the end of the negotiations. That will provide both grip and accountability of the process and outcome.

If the prime minister is prepared to indicate her willingness to share these objectives on Tuesday, that would be a big step forward in the national interest.

Article Link To The Guardian:

What Obama Deserves Credit For -- And Doesn’t

By Robert J. Samuelson
The Washington Post
January 16, 2017

It is far too early to render final judgment on the Obama presidency. All the chatter about his “legacy” overlooks two obvious realities. The significance of President Obama will depend heavily on events that have not yet happened (for starters, the fate of the Iranian nuclear deal) and comparisons, for better or worse, with his successor. Still, it’s possible to make some tentative observations.

As I’ve written before, the administration’s greatest achievement was, in its first year, stabilizing a collapsing economy and arguably avoiding a second Great Depression. Even now, only eight years after the event, many people forget the crash’s horrific nature. Unemployment was increasing by roughly 700,000 to 800,000 job losses a month. No one knew when the downward spiral would stop.

In this turbulence, Obama was a model of calm and confidence. The policies he embraced — various economic stimulus packages, support for the Federal Reserve, the rescue of the auto industry, the shoring up of the banking system — were what the economy needed, though they were not perfect in every detail. Although the subsequent recovery was disappointing, it’s not clear that anyone else would have accomplished more.

If Obama had done nothing else, rescuing the economy would ensure a successful presidency. But he did do other things, and we shouldn’t forget the historic significance of having an African American as the nation’s leader.

Still, his broader record is mixed. I think he will get credit for Obamacare, regardless of how Donald Trump and the Republicans modify it. The argument will be made, accurately I think, that the expansion of insurance coverage to roughly 20 million Americans would never have occurred if Obama hadn’t put it at the top of his agenda.

This does not mean that promoting Obamacare was uniformly wise. It did not solve the problem of high health-care costs, and it aggravated political polarization. It also seems a product of personal ambition, reflecting Obama’s desire to be remembered as the liberal president who finally achieved universal coverage. In reality, even after the 20 million, there were an estimated 28 million uncovered Americans in 2016, says the National Center for Health Statistics.

Some of Obama’s biggest setbacks were widely shared. One was coming to grips with an aging society. As I’ve repeatedly written, the growing population of older people is distorting government priorities, because Social Security, Medicare and Medicaid (which covers nursing home care) increasingly dominate the federal budget, squeezing other programs and enlarging budget deficits.

Obama never dealt aggressively with this problem, because doing so would have offended his liberal political base. His failure made it impossible to secure major concessions from Republicans on raising taxes. Similar failures plagued immigration policy and climate change. Facing political paralysis, Obama resorted to executive orders and regulations. Many will probably be revoked in a Trump administration.

What Obama lacked was the ability to inspire fear as well as respect, and this also helps explain why his foreign policy often fell short — Syria being the best but not the only example. Few presidents have worshiped their words more than Obama. To take one example: His farewell speech last week ran 50 minutes; the average for seven other post-World War II presidents was 18 minutes, according to the Wall Street Journal.

Not only did he worship his words, but he assigned them more power than they possessed. At times, he seemed to treat the White House as a graduate-school seminar where he was the smartest guy in the room and, therefore, deserved to prevail. At news conferences, he gave long, convoluted responses full of subtleties that may have impressed political and media elites but didn’t do much to shift public opinion.

Our government has turned into a quasi-parliamentary system. Controversial proposals are supported and opposed mainly, or exclusively, by one party or the other. This is a bad development. It strengthens fringes in both parties, who hold veto power. It discourages compromise and encourages stalemate. The legislation it produces is often acceptable to partisans but less so to the wider middle class, undermining public faith in government.

The question historians need to ask is whether Obama contributed to this dysfunctional system or was victimized by it. He was unable to construct a working relationship with congressional Republicans. Was this because, as the White House has contended, Republicans had been unmovable from partisan positions? Or was Obama complicit, because his own partisan constraints left little maneuvering room? Maybe both.

In this era of snap judgments, a true verdict on Obama is years away.

Article Link To The Washington Post:

Trump Vows ‘Insurance For Everybody’ In Obamacare Replacement Plan

By Robert Costa and Amy Goldstein
The Washington Post
January 16, 2017

President-elect Donald Trump said in a weekend interview that he is nearing completion of a plan to replace President Obama’s signature health-care law with the goal of “insurance for everybody,” while also vowing to force drug companies to negotiate directly with the government on prices in Medicare and Medicaid.

Trump declined to reveal specifics in the telephone interview late Saturday with The Washington Post, but any proposals from the incoming president would almost certainly dominate the Republican effort to overhaul federal health policy as he prepares to work with his party’s congressional majorities.

Trump’s plan is likely to face questions from the right, after years of GOP opposition to further expansion of government involvement in the health-care system, and from those on the left, who see his ideas as disruptive to changes brought by the Affordable Care Act that have extended coverage to tens of millions of Americans.

In addition to his replacement plan for the ACA, also known as Obamacare, Trump said he will target pharmaceutical companies over drug prices.

“They’re politically protected, but not anymore,” he said of pharmaceutical companies.

The objectives of broadening access to insurance and lowering health-care costs have always been in conflict, and it remains unclear how the plan that the incoming administration is designing — or ones that will emerge on Capitol Hill — would address that tension.

In general, congressional GOP plans to replace Obamacare have tended to try to constrain costs by reducing government requirements, such as the medical services that must be provided under health plans sold through the law’s marketplaces and through states’ Medicaid programs. House Speaker Paul D. Ryan (R-Wis.) and other Republicans have been talking lately about providing “universal access” to health insurance, instead of universal insurance coverage.

Trump said he expects Republicans in Congress to move quickly and in unison in the coming weeks on other priorities as well, including enacting sweeping tax cuts and beginning the building of a wall along the Mexican border.

Trump warned Republicans that if the party splinters or slows his agenda, he is ready to use the power of the presidency — and Twitter — to usher his legislation to passage.

“The Congress can’t get cold feet because the people will not let that happen,” Trump said during the interview with The Post.

Trump said his plan for replacing most aspects of Obama’s health-care law is all but finished. Although he was coy about its details — “lower numbers, much lower deductibles” — he said he is ready to unveil it alongside Ryan and Senate Majority Leader Mitch McConnell (R-Ky.).

“It’s very much formulated down to the final strokes. We haven’t put it in quite yet but we’re going to be doing it soon,” Trump said. He noted that he is waiting for his nominee for secretary of health and human services, Rep. Tom Price (R-Ga.), to be confirmed. That decision rests with the Senate Finance Committee, which hasn’t scheduled a hearing.

Trump’s declaration that his replacement plan is ready comes after many Republicans — moderates and conservatives — expressed anxiety last week about the party’s lack of a formal proposal as they held votes on repealing the law. Once his plan is made public, Trump said, he is confident that it could get enough votes to pass in both chambers. He declined to discuss how he would court wary Democrats.

So far, Republicans have taken the first steps toward repealing the law through budget reconciliation, a process by which only a simple majority is needed in the Senate. The process would enable them to dismantle aspects of the law that involve federal spending.

The plan that Trump is preparing will come after the House has taken more than 60 votes in recent years to kill all or parts of the ACA to kill to adopt more conservative health-care policies, which tend to rely more heavily on the private sector.

“I think we will get approval. I won’t tell you how, but we will get approval. You see what’s happened in the House in recent weeks,” Trump said, referencing his tweet during a House Republican move to gut their independent ethics office, which along with widespread constituent outrage was cited by some members as a reason the gambit failed.

As he has developed a replacement package, Trump said he has paid attention to critics who say that repealing Obamacare would put coverage at risk for more than 20 million Americans covered under the law’s insurance exchanges and Medicaid expansion.

“We’re going to have insurance for everybody,” Trump said. “There was a philosophy in some circles that if you can’t pay for it, you don’t get it. That’s not going to happen with us.” People covered under the law “can expect to have great health care. It will be in a much simplified form. Much less expensive and much better.”

Republican leaders have said that they will not strand people who gained insurance under the ACA without coverage. But it remains unclear from either Trump’s comments in the interview or recent remarks by GOP leaders on Capitol Hill how they intend to accomplish that.

For conservative Republicans dubious about his pledge to ensure coverage for millions, Trump pointed to several interviews he gave during the campaign in which he promised to “not have people dying on the street.”

“It’s not going to be their plan,” he said of people covered under the current law. “It’ll be another plan. But they’ll be beautifully covered. I don’t want single-payer. What I do want is to be able to take care of people,” he said Saturday.

Trump did not say how his program overlaps with the comprehensive plan authored by House Republicans. Earlier this year, Price suggested that a Trump presidency would advance the House GOP’s health-care agenda.

When asked in the interview whether he intends to cut benefits for Medicare as part of his plan, Trump said “no,” a position that was reiterated Sunday on ABC by Reince Priebus, Trump’s incoming chief of staff. He did not elaborate on that view or how it would affect his proposal. He expressed that view throughout the campaign.

Timing could be difficult as Trump puts an emphasis on speed. Obama’s law took more than 14 months of debate and hundreds of hearings. To urge lawmakers on, Trump plans to attend a congressional Republican retreat in Philadelphia this month.

Moving ahead, Trump said that lowering drug prices is central to reducing health-care costs nationally — and that he will make it a priority as he uses his bully pulpit to shape policy. When asked how exactly he would force drug manufacturers to comply, Trump said that part of his approach would be public pressure “just like on the airplane,” a nod to his tweets about Lockheed Martin’s F-35 fighter jet, which Trump said was too costly.

Trump waved away the suggestion that such activity could lead to market volatility on Wall Street. “Stock drops and America goes up,” he said. “I don’t care. I want to do it right or not at all.” He added that drug companies “should produce” more products in the United States.

The question of whether the government should start negotiating how much it pays drugmakers for older Americans on Medicare has long been a partisan dispute, ever since the 2003 law that created Medicare drug benefits prohibited such negotiations.

Trump’s goal is uncertain, however, with respect to Medicaid, the insurance for low-income Americans run jointly by the federal government and states. Under what is known as a Medicaid “best price” rule, pharmaceutical companies already are required to sell drugs to Medicaid as the lowest price they negotiate with any other buyer.

On his plan for tax cuts, Trump said that “we’re getting very close” to putting together legislation. His advisers and Ryan met last week and have been working from his campaign’s plan and from congressional proposals to slash current rates. “It’ll probably be 15 to 20 percent for corporations. For individuals, probably lower. Great ­middle-class tax cuts,” Trump said.

On corporate tax rates, “We may negotiate a little, but we want to bring them down and get as close to 15 percent as we can so we can see a mushrooming of jobs moving back.”

Trump said he would not relent on his push for increasing taxes on U.S. companies that manufacture abroad — and insisted that the upcoming tax cuts should be enough reason for companies to produce within the United States.

“If companies think they’re going to make their cars or other products overseas and sell them back into the United States, they’re going to pay a 35 percent tax,” he said.

Briefly touching on immigration, Trump said that building a border wall and curbing illegal immigration remain at the top of his to-do list and that he is spending significant time looking at ways to begin projects, both with Congress and through executive action. He did not disclose what was to come on those fronts.

Article Link To The Washington Post:

Sterling Slides To Three-Month Lows On 'Hard Brexit' Fears

By Wayne Cole
January 16, 2017

Sterling dived to three-month lows in thin Asian trade early on Monday, after media reports that the British government is prepared to make a "hard" exit from the European Union rekindled investors' fears about the impact of the impending move.

Sterling stole the spotlight from the dollar, which has come under pressure in recent sessions as investors pondered what to expect from U.S. President-elect Donald Trump's economic policies after he takes office on Friday.

The pound sank as low as $1.1983, depths not seen since the flash crash of early October. It last stood at $1.2038, down 1.1 percent on the day.

Dealers said the market was reacting in part to a report in The Sunday Times newspaper that British Prime Minister Theresa May will this week signal plans for a "hard Brexit" by saying she's willing to quit the European Union's single market to regain control of Britain's borders.

Investors have been worried such a decisive break from the single market would hurt British exports and drive foreign investment out of the country.

May has said she will trigger Article 50, starting the formal withdrawal from the EU, by the end of March. So far, she has revealed few details about what kind of deal she will seek, frustrating some investors, businesses and lawmakers.

May's speech on Tuesday will stress the need for Britons, who voted for Brexit by 52 to 48 percent in last June's referendum, to unite around common goals such as protecting and enhancing workers' rights.

The euro was up 0.9 percent at 0.8827 pounds, while sterling fell 1.4 percent on the perceived safe-haven yen to 137.65 yen.

The Japanese currency gained broadly, with the U.S. dollar dipping 0.2 percent to 114.30 yen, moving back toward last week's low of 113.75.

"The risk-averse sentiment stemming from the 'hard Brexit' is pushing down the dollar/yen," Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

"But so far, I think the correction from the dollar/yen's high in December, and concerns about stronger protectionism under the new U.S. presidency have been the dominant theme."

Trump revealed few policy clues at his first press conference last week since his November election victory. The dollar rose after the election on expectations that his administration would embark on stimulus to boost growth and inflation, prompting the U.S. Federal Reserve to adopt a faster pace of interest rate hikes.

But Trump's protectionist stance has also added to some investors' risk aversion, as he has threatened to impose retaliatory tariffs on China, build a wall along the Mexican border and tear up the North American Free Trade Agreement (NAFTA).

Buoyed by the weaker pound, the dollar index, which gauges the greenback against a basket of six major rivals, added 0.2 percent to 101.39.

The euro edged down 0.1 percent against the dollar to $1.0629.

Later this week, the European Central Bank is widely expected to hold policy steady at its regular meeting on Thursday, according to economists polled by Reuters. Last month, the ECB surprised markets by saying it would trim its monthly bond purchases to 60 billion euros starting in April.

Article Link To Reuters:

U.K. Said To Seek To Calm Investors After May’s Brexit Speech

Treasury planning to speak to major banks to offer reassurance; Pound falls below $1.20 amid reports May planning hard Brexit.

By Svenja O'Donnell and Timothy Ross
January 16, 2017

The U.K. government is drawing up plans to try to reassure investors amid expectations that Prime Minister Theresa May’s long-awaited blueprint for Brexit will cause more market turmoil, according to two people familiar with the situation.

Government officials expect sterling to take another hit when May sets out her vision for leaving the bloc in a speech on Tuesday, and the Treasury is preparing to speak to major banks in London to try to smooth the reaction, said the people, who declined to be named as the plans aren’t public. While Treasury officials often reach out to banks to explain policy, it’s unusual for the prime minister’s office to anticipate a bad market reaction, they said.

The pound fell against the dollar after four U.K. newspapers reported on Sunday that May would outline moves for a hard, clean break from the European Union’s 27 other member states. Sterling tumbled as much as 1.6 percent in early trading to below $1.20 for the first time since the so-called flash crash in October.

The premier will say that the U.K. is ready to leave the European customs union and single market if other members are not prepared to give Britain control over immigration, according to reports in The Sunday Times, Sunday Telegraph, Sunday Express and Sun on Sunday. May’s office declined to confirm or deny the newspaper reports, describing them as based on “speculation.”

Talking Tough

The reports came amid signs that the U.K. is taking a tougher approach to the EU ahead of formal talks, warning that Europe has the most to lose if Britain crashes out of the bloc without a deal.

Brexit Secretary David Davis suggested the European Union could “fail” if negotiations do not result in a strong new trade agreement with the U.K. while Chancellor Philip Hammond floated the idea of radically changing the U.K.’s economic model. In a hint he could cut corporate taxes and employment rules, Hammond vowed to do “whatever we have to do” to ensure the country remains competitive, if Europe imposes tariffs on trade with Britain.

“We don’t want the EU to fail, we want it to prosper politically and economically, and we need to persuade our allies that a strong new partnership with the U.K. will help the EU to do that,’’ Davis wrote in The Sunday Times. “A disorderly U.K. exit would pose as much risk to financial stability on the Continent, and potentially more in the short term, as it would at home.”

In a report to be published on Monday by the Policy Exchange think tank, Gerard Lyons, a
former adviser to pro-Brexit Foreign Secretary Boris Johnson, will argue Britain can still prosper even if it faces tariffs on its exports to Europe after the split.

Race To Bottom

In the newspaper interview, Hammond promised to take measures to boost the U.K.’s competitiveness if the country fails to secure post-Brexit access to the European single market.

“If Britain were to leave the European Union without an agreement on market access, then we could suffer from economic damage at least in the short-term,” Hammond told Welt am Sonntag, a German newspaper, on Sunday. “In this case, we could be forced to change our economic model and we will have to change our model to regain competitiveness. And you can be sure we will do whatever we have to do.”

European politicians responded with scorn to the comments. The British government is “at a loss,” according to Norbert Roettgen, chairman of the foreign affairs committee in Germany’s lower house of parliament and a member of Chancellor Angela Merkel’s Christian Democratic Union, cited by Die Welt. The Guardian reported that the Netherlands is threatening to veto any U.K. trade deal with the EU if it triggers what Deputy Prime Minister Lodewijk Asscher called a “race to the bottom for profits taxation.”

At home, the main opposition Labour Party also criticized Hammond. “It seems to me a recipe for some kind of trade war with Europe in the future,” party leader Jeremy Corbyn told BBC television’s Andrew Marr show. “That really isn’t a sensible way forward.”

Article Link To Bloomberg: