How Successful Was Carney's Forward Guidance? Depends How Closely You Listened
If you'd listened to Mark Carney when he arrived at the Bank of England in the summer of 2013 and then zoned out, there's a chance you have a better handle on the future of monetary policy than someone who's followed the governor's remarks closely.
Back then, the big idea swirling in the air was forward guidance. Carney introduced the concept on Aug. 8, and the BOE's analysis, which linked policy to unemployment, showed record-low rates were likely to stay until at least the third quarter of 2016.
Fast-forward to last week, when the governor presented a new round of forecasts and interest-rate derivatives showed investors are betting on the first move in -- November 2016. Pretty close.
After the unemployment rate unexpectedly fell below 7% in February 2014, far earlier than the central bank forecast, Carney's guidance morphed into references to a vast basket of spare-capacity measures, and a pledge that increases, when they came, would be "limited and gradual."
So far, so good for forward guidance. But what if you'd listened to everything Carney said in between?
by J Ryan
Since the original guidance was nullified, the governor's tried to rein in market expectations, he's tried to push them out, and he's said they were fine. And all the while, the benchmark interest rate has been stuck at 0.5%.
"I don't put too much weight on their guidance these days," said David Tinsley, an economist at UBS in London. "If they had a much clearer checklist on what data conditions would need to be in order for them to hike, that would be more beneficial than trying to pin the tail on a moving donkey."
Carney said in July that the timing for rate changes would come into "sharper relief" around the turn of the year, and he insisted on this throughout the volatility from China and emerging markets, and a U.K. inflation rate that's stuck around zero. Not to mention Federal Reserve Chair Janet Yellen's recent comment that a U.S. increase in December is a "live possibility."
As the BOE governor presented the bank's new economic projections on Nov. 5, investors reacted by pushing out bets on an increase to as late as the first quarter of 2017. Hours later, in a Bloomberg Television interview, he said that it was "reasonably prudent" to expect a move in 2016. And now, here we are, looking at November next year.
by J Ryan
Bank observers are used to the form. On June 12, 2014, he told investors they were behind the curve, and the next day they repriced bets for the first quarter-point increase to Feb. 2015 from May 2015. Two weeks later, as he explained to lawmakers that "developments on the wage front suggest to me that there has been more spare capacity in the labor market than we had thought," lawmaker Pat McFadden said the communications changes made Carney an "unreliable boyfriend."
So if you'd listened to Carney in August 2013, and then donned some very substantial noise-cancelling headphones, all the drama would have passed you by. How long his latest guidance to markets lasts is another question. The bank says it's reacting to data and events, and there's a lot coming up. With the Fed mulling a rate increase, and the European Central Bank considering more stimulus, it's just as vulnerable to surprises as anyone else.
"Monetary policy is always data dependent, it would be a dereliction of duty to pretend that it isn't," said Simon Wells, an economist at HSBC in London and a former BOE official. "Perhaps if the bank is guilty of overcommunicating, the market is guilty of overinterpreting."
Japan's Lost Decade Has Lesson for Those Dreading China Slowdown
When Japan’s economy downshifted dramatically in the 1990s, the rest of the world managed to do just fine. Now, as China suffers a sustained slowdown, there’s a group of economists who say the same may well happen again.
Sure, global growth already has been clipped by the deterioration in China’s expansion. It is, after all, the world’s second-largest economy, just as Japan was back then.
Yet there are reasons to suspect that all the hand-wringing about China pulling down the rest of the world may be a tad overdone. Just as the country’s slump is producing obvious losers -- commodity exporters being a prime example -- it’s producing winners as well. Airlines, automakers and U.S. consumers are among those making out from the steep decline in prices for energy and other raw materials the China slump has wrought.
by R Miller
And it’s these less-publicized beneficiaries that will help the world withstand a protracted period of sub-par performance by China -- provided, of course, it avoids a hard landing and continues to shift the focus of its economy toward consumers and services and away from investment and exports.
"There will be pain and suffering," said Peter Hooper, a 26-year veteran of the Federal Reserve who is now chief economist for Deutsche Bank Securities in New York. "But as long as the slowdown happens gradually, I don’t think it will be a major problem” for global expansion.
Weak Expansion
Chinese President Xi Jinping said Nov. 3 that average annual growth should be no less than 6.5 percent in the next five years. That suggests leaders are ready to accept the weakest period of expansion since the economy was opened up more than three decades ago.
Even this goal might prove too ambitious, said Nariman Behravesh, chief economist in Lexington, Massachusetts, for consultant IHS Inc. He sees the annual average at 5.5 percent to 6 percent.
Just as Japan did in the 1990s, China runs a trade surplus and so is a net supplier to the rest of the world rather than a source of demand, said Danny Gabay, a former Bank of England official who is now co-director of Fathom Consulting in London. This means the impact of its deceleration on overall global growth will be much more muted than if the U.S. suddenly downshifted.
And while China’s economy is bigger and more internationally integrated than Japan’s two decades ago, it isn’t projected to undergo as sharp a swoon: Japan suffered a so-called lost decade when growth averaged about 1 percent a year from 1991 through 2000 after its real-estate and stock-market bubbles burst.
by R Miller
Virtually Unscathed
Computer simulations by JPMorgan Chase & Co. economists found that a 1 percentage point drop in Chinese growth would knock about half a percentage point off the pace of global expansion, with other emerging markets most affected. The U.S., with exports to China amounting to just about 1 percent of gross domestic product, comes out virtually unscathed as American consumers benefit from lower import prices.
Not everyone is so optimistic. Economist David Levy says the world economy is close to entering a recession led by steep cutbacks in spending by China and other emerging markets.
“The problem is that China has been growing so long with huge over-investment that it needs to slash investment so much," said Levy, who heads the Jerome Levy Forecasting Center LLC in Mount Kisco, New York.
The main impact of China’s slackening economy so far has been on commodity prices, as the Asian nation’s purchases fall well short of suppliers’ projections. The Bloomberg Commodity Index has lost almost 20 percent this year, falling near the lowest level since 1999.
Auto makers are reaping the benefits. The cost to produce the average North American vehicle has dropped by $591 in the last year thanks to falling prices for plastics, steel and other raw materials, according to an analysis by New York-based consultants AlixPartners. This represents a potential windfall of more than $1 billion each for General Motors Co. and its suppliers, and Ford Motor Co. and its suppliers.
What’s particularly unusual, said AlixPartners managing director Mark Wakefield in Detroit, is that costs are declining even though auto sales are strong. Typically such a steep fall would coincide with -- and result from -- a drop in U.S demand.
At Signet Jewelers Ltd., the China slowdown has shown up in lower gold expenses that are flowing through to its bottom line.
"We should continue to expect to see benefits coming in from commodity pricing," Michele Santana, chief financial officer, said in an August 27 conference call after the Hamilton, Bermuda-based company reported an almost 20 percent gain in adjusted earnings per share for the second quarter.
Airlines also prosper as their jet-fuel costs plunge. Deutsche Lufthansa AG, Europe’s second-largest, raised its earnings forecast for 2015 on Oct. 29 after an increase in demand mid-year and the decline in oil prices contributed to a 51 percent surge in third-quarter operating profit. The Cologne, Germany-based company said its fuel expenses this year will total 5.7 billion euros ($6.1 billion), down 1.1 billion euros from last year.
Plummeting oil prices are proving to be a boon to U.S. and European households as well. And that’s translating into more spending. Spanish retail sales rose in September at the fastest annual pace in nine months as cheaper energy prices and falling unemployment buoyed consumers.
In the U.S., Americans are using the savings from lower gasoline prices to eat out more often and spend more on entertainment.
"Right now, there are some very positive things happening from a consumer perspective," Emil Brolick, chief executive officer of Wendy’s Company, said in a Nov. 4 conference call. "You’ve got a declining gasoline prices,” falling unemployment and rising home prices. The Dublin, Ohio-based restaurant chain said North American same-store sales rose 3.1 percent in the third quarter.
The dip in Chinese growth may even produce some winners in Asia, according to Shang-Jin Wei, chief economist at the Asian Development Bank in Manila.
Lure Manufacturing
Vietnam and Bangladesh -- the world’s second-largest garment maker -- could gain global market share as companies exit China because of rising costs there. So too might India, which could lure some lower-end manufacturing from its fellow Asian nation, he said.
"India is in a relatively favorable position to weather the ripple effects of a China growth slowdown," said Eswar Prasad, a professor at Cornell University in Ithaca, New York, and former International Monetary Fund official. "Its dependence on exports to China is quite modest, and commodity-price weakness works to India’s advantage."
Central bank Governor Raghuram Rajan already has taken advantage of the drop in inflation from lower imported commodity prices, surprising economists Sept. 29 with a bigger-than-expected half percentage point cut in the benchmark repurchase rate.
"There is a silver lining" from the slowdown in China, IHS’s Behravesh said. "It’s producing winners, particularly in the developed world."
Asian Stocks Rally Before China Data Dump as Crude Resumes Drop
Asian equities climbed from a four-week low ahead of an onslaught of Chinese economic data, while the dollar retreated against high-yielding currencies and crude oil resumed its descent.
by E O'Brien
Gains in Australian and Japanese stocks drove the advance among Asian shares, which slid last session as evidence of the slowdown in China’s economy unsettled investors already bracing for higher U.S. interest rates as soon as December. Currencies from Australia to New Zealand and Malaysia rallied to pare back some of the greenback’s gains since last week’s U.S. payrolls data. Crude oil reversed Tuesday’s advance and metals retreated.
Reports on Chinese retail sales, factory output and fixed-asset investment due Wednesday comes on the heels of of data indicating the world’s No. 2 economy faces a deflationary threat. Last quarter, global markets were at their most volatile in four years with concern over the impact globally of of a slowdown in China sparked by the country’s surprise currency devaluation and equity rout. The annual online shopping event that is Singles Day in China may also give traders a reading on consumer demand there.
“There will be close attention on the Chinese data dump,” Chris Weston, chief market strategist in Melbourne at IG Ltd., said in an e-mail to clients. “Given the trends we have seen in China’s inflation readings, the world will be keen to see if further stability is prevalent in some of the more high-frequency numbers.”
Stocks
The MSCI Asia Pacific Index added 0.2 percent by 11:27 a.m. in Tokyo, rallying from its lowest close since Oct. 14. Australia’s S&P/ASX 200 Index climbed 0.3 percent, rising for the first day this week, and Japan’s Topix index was up 0.2 percent after falling at the open.
New Zealand’s S&P/NZX 50 Index gained 0.1 percent, while the Kospi index in Seoul slipped 0.6 percent, heading for a fifth day of losses.
Taiwan’s benchmark also slid, sinking 1.1 percent. Credit Suisse Group AG said iPhone component orders from Apple Inc. were recently down as much as 10 percent, sparking a 3.2 percent drop in the company’s shares Tuesday. Chipmakers comprise more than 20 percent of the Taiex gauge.
In Hong Kong, the Hang Seng index was little changed while the Hang Seng China Enterprises gauge, which tracks mainland Chinese equities listed in the city, dropped 0.9 percent. The Shanghai Composite Index, which entered a bull market last week, fell 0.4 percent.
Standard & Poor’s 500 Index futures slipped 0.1 percent after the U.S. benchmark ended Tuesday up 0.2 percent following a day of fluctuations.
by E O'Brien
Bonds
Australian government bonds advanced after Treasuries rose on Tuesday for the first time this month. Yields on Australian notes due in a decade declined one basis point, or 0.01 percentage point, to 2.89 percent. Those on 10-year New Zealand notes fell two basis points to 3.52 percent.
The U.S. sold $52 billion of four-week bills Tuesday in the biggest regularly scheduled offering on record.
Currencies
The yen, which typically moves at odds to Japanese equities, climbed 0.3 percent to 122.78 per dollar. The euro also rose 0.3 percent to $1.0758 after sliding as much as 0.7 percent last session to its lowest price since April 23.
Emerging-market currencies in Asia built on some gains from Tuesday, with the Thai baht strengthening 0.2 percent. The Malaysian ringgit advanced 0.2 percent after trading was closed Tuesday for a holiday.
The Australian dollar appreciated 0.4 percent to 70.61 U.S. cents after touching its lowest level since Oct. 2 in the wake of Friday’s U.S. jobs data, while the kiwi gained 0.5 percent to 65.64 U.S. cents. Both commodity-dependent countries count China among their biggest trading partners.
China is expected to record a 10.9 percent bump in retail sales for October, matching growth in September. Industrial production probably expanded by 5.8 percent, according to the median of economists’ estimates, up from an increase of 5.7 percent in the previous month. Data Tuesday showed a pullback in Chinese consumer inflation and the 44th straight monthly drop in producer prices.
Commodities
West Texas Intermediate crude slipped 1.1 percent to $43.73 a barrel, erasing last session’s 0.8 percent advance.
U.S. oil inventories increased by 6.3 million barrels through Nov. 6, the American Petroleum Institute was said to have reported late Tuesday. Government data Thursday is forecast to show supplies rose by 1.3 million barrels, a Bloomberg survey of analysts shows. OPEC is considering raising its official production target to take into account new member Indonesia, according to two delegates from the group.
Aluminum slipped 1.5 percent to $1,485 per metric ton on the London Metals Exchange, on track for a third day of declines. Zinc was down 0.7 percent to $1,596, sliding for a sixth session. China is the world’s biggest consumer of industrial metals.
Chinese Billionaire Buys Modigliani for Record $170.4 Million
Chinese billionaire Liu Yiqian bought Amedeo Modigliani’s painting of a reclining nude woman for $170.4 million, the second-highest price for an artwork at auction, in a volatile sale at Christie’s in New York.
by K Kazakina
Modigliani’s 1917 “Nu Couche (Reclining Nude)” anchored Christie’s special, mixed-category sale titled “The Artist’s Muse,” which included 34 paintings and sculptures created from the 1860s through the 2000s. The evening tallied $491.4 million, setting five auction records for artists including Gustave Courbet and Roy Lichtenstein, whose painting of a nurse sold for $95.4 million. The Modigliani price was an auction record for the Italian artist.
Can you?”Marathon Sales
Some resistance was already visible during the packed evening sale, which was part of a 10-day marathon in which more than $2.1 billion of art is on offer at Christie’s, Sotheby’s and Phillips. Ten lots failed to find buyers, including those by Lucian Freud and Willem de Kooning.
The results fell within Christie’s presale target range of $442 million to $540 million, but were 30 percent lower than the company’s first hybrid sale in May, “Looking Forward to the Past.” That auction tallied $705.9 million, and a Pablo Picasso painting set a new auction record at $179.4 million.
To win the prized artworks, Christie’s offered the sellers of 17 pieces minimum guaranteed prices regardless of the outcome in the salesroom. Initially, the guarantees were backed by Christie’s. Before the auction started, Jussi Pylkkanen, the auctioneer, announced that five guaranteed lots, including top works by Modigliani and Lichtenstein, were financially backed by third parties, a move that reduced Christie’s risk but could also eat into potential profit.
Bidding for Modigliani’s ravishing brunette on a red couch started at $75 million and attracted seven hopefuls. The Long Museum in China was the buyer of the Modigliani, according to Christie’s. The museum was founded by Liu Yiqian, who frequently buys art with his American Express card.
by K Kazakina
Sensational Price
“It was a sensational picture and it brought a sensational price,” said Guy Jennings, managing director of the Fine Art Fund in London and Christie’s former deputy chairman of Impressionist and modern art in New York. “It was the best painting Modigliani ever made. It’s not often that you can say this about an artwork at auction.”
Hackers and conspirators in more than a dozen countries generated hundreds of millions of dollars in illicit proceeds on pump-and-dump stock schemes and particularly lucrative online gambling, prosecutors said.
From 2012 to mid-2015, the suspects and their co-conspirators successfully manipulated dozens of publicly traded stocks, sent misleading pitches to clients of banks and brokerages whose e-mail addresses they’d stolen, and profited by using trading accounts set up under fake names, prosecutors said.
Along the way, members of the ring tried to extract nonpublic information from financial corporations, processed payment information for fake pharmaceuticals and fake anti-virus software, falsified passports and took control of a New Jersey credit union, said prosecutors. They used 75 companies and bank and brokerage accounts around the world to launder money, prosecutors wrote. Other alleged offenses include hacking, securities fraud, wire fraud and identity theft.
The global network stretched from Israel to the U.S., with a dozen online casinos and payments that ran through Cyprus, Azerbaijan and Switzerland.
The co-conspirators deceived financial institutions into processing and authorizing payments to and from the casino companies and others, prosecutors wrote in their latest indictment of Gery Shalon, Joshua Aaron and Ziv Orenstein, who they say are at the center of the scheme. Shalon and Orenstein were arrested in Israel in July. Aaron remains at large.
“They colluded with corrupt international bank officials who willfully ignored its criminal nature in order to profit from, as a co-conspirator described it to Shalon, their payment processing ‘casino/software/pharmaceutical cocktail’,” according to the indictment of the three.
Anthony Murgio, who was arrested in Florida in July, was indicted separately for crimes related to a Bitcoin-exchange service and the takeover of a New Jersey credit union to further the business.
Shalon was the leader and self-described “founder” of the sprawling cybercriminal enterprise, which the indictment describes as having hundreds of employees and co-conspirators. In one case, according to the indictment, he boasted that a profitable stock sale was a “small step towards a large empire.”
“We buy them [i.e., stocks] very cheap, perform machinations, then play with them,” Shalon is cited as explaining to a co-conspirator. Responding to the co-conspirator’s rhetorical question about whether buying stocks was popular among Americans, he said: “It’s like drinking freaking vodka in Russia.”
Shalon -- an Israeli citizen who also went by the names Garri Shalelashvili, Phillipe Mousset and Christopher Engeham -- directed hacks to further his market-manipulation and Internet gambling schemes, the indictment said. Shalon concealed at least $100 million in Swiss and other bank accounts, it said.
The new allegations against the four broaden dramatically the scope of a wide-ranging criminal enterprise with hacking at its core. Outlines of the government’s case against the men emerged with their arrest in July, when Shalon, Orenstein and Aaron were implicated in a pump-and-dump scheme.
The three men were linked to hacks of JPMorgan, Fidelity Investments Ltd. and E*Trade, Bloomberg News reported at the time.
The U.S. described a vast, multi-year criminal enterprise centering on hacks of at least nine big financial and publishing firms and the theft of information on 100 million of their customers that fueled a web of stock manipulation, credit-card fraud and illegal online casinos.
Two indictments, unsealed Tuesday, tied three of four suspects to previously reported hacks of JPMorgan Chase & Co., E*Trade Financial Corp., Scottrade Financial Services Inc. and Dow Jones & Co., a unit of News Corp.
The hackers located some 10 million e-mail addresses of customers and stole millions of those from Dow Jones, identified as Victim 8 in the indictment. In October, the company disclosed that its computer systems had been hacked. As part of that disclosure, Dow Jones Chief Executive Officer William Lewis said that some customer payment information may have been compromised -- on no more than 3,500 accounts -- and that it was unknown whether other information had been taken.
A week earlier, Scottrade disclosed that it had been hacked and that information on 4.6 million customers had been taken.
According to the indictment, Shalom and a co-conspirator expanded their efforts to seek material non-public information from firms they were hacking. In one e-mail, they referred to seeking "interesting info" from top managers at Victim 5, a St. Louis brokerage firm now confirmed as Scottrade.
A spokeswoman for Dow Jones said in a statement: "The indictment unsealed today refers to the public disclosure we made on October 9. The government’s investigation is ongoing, and we continue to cooperate with law enforcement."
The hack of Fidelity has been previously reported. The company said it has no indication that any customer accounts, customer information or related systems were affected. E*Trade confirmed it was attacked in late 2013 but declined to provide more information.
“We continue to cooperate with law enforcement in fighting cybercrime,” JPMorgan spokeswoman Trish Wexler said in a statement.
U.S. Attorney Preet Bharara in Manhattan has scheduled a press conference for Tuesday to explain the charges.
Hong Kong’s Richest Man Under Fire to Raise $12 Billion Bid
Hong Kong billionaire Li Ka-shing’s efforts to reorganize his business empire hit a setback after an influential proxy advisory firm recommended investors reject a $12.3 billion buyout offer from the tycoon for low-balling minority shareholders.
The all-stock offer from Li’s Cheung Kong Infrastructure Holdings Ltd. for affiliate Power Assets Holdings Ltd. should be as much as 13 percent higher, Institutional Shareholder Services Inc. said in a report Monday. ISS, which provides advice to more than 1,600 institutional clients worldwide, also said that CKI’s special dividend should be paid before a deal goes through, not after as proposed by CKI.
The recommendation from ISS, which also flagged concerns about conflicts of of interest, is the latest setback facing Hong Kong’s richest tycoon in his pursuit to merge his utility businesses as the octogenarian billionaire prepares to hand over power to his eldest son Victor Li. Investor opposition prompted CKI in October to sweeten its offer.
"We believe that in the end they might raise the offer a little bit," said Niklas Hageback, who helps oversee about $212 million -- including Power Assets shares -- at Valkyria Kapital Ltd. "In the end, they will probably go through with this because they need the deal."
Offering Discount
CKI shares fell 2.4 percent to close at HK$68.55 in Hong Kong, while Power Assets dropped 1.4 percent to HK$73.85, meaning CKI is offering a 1.1 percent discount for Power Assets shares based on Tuesday’s close.
The board of Power Assets and its Independent Board Committee recommend that investors vote in favor of the offer because it’s fair and reasonable, the company said in an e-mailed statement. A representative at CKI didn’t respond to queries.
Considering ISS’s influence and the low bar needed to derail the transaction, CKI’s deal is "almost impossible" to pass unless it’s sweetened, CLSA analysts wrote in a research note to clients on Tuesday.
"The time for small incremental moves is over," CLSA said in its note. "CKI should step up to the game and make an offer investors can’t refuse."
Power Assets shareholders are due to vote Nov. 24 on the offer. To pass, the deal must be approved by at least 75 percent of minority shareholders voting at the meeting. The deal would also fail if more than 10 percent of all minority shareholders reject it. If CKI sticks to its proposal and the deal fails, the company will have to wait at least a year before making another offer.
Conflicts of Interest
Li has reason to pursue Power Assets. The proposed merger, first announced on Sept. 8, would give CKI access to the $8.7 billion in cash and equivalents held by Power Assets and bring together holdings in 11 projects globally. After the acquisition, the Li family’s CK Hutchison Holdings Ltd. would own 49 percent of the combined company.
In its report, ISS said a fair value for Power Assets would be for CKI to offer 1.09 to 1.2 of its own shares for each Power Assets share, compared with the 1.066 merger ratio CKI proposed. It also questioned the independence of Power Assets directors and said neither CKI nor Power Assets have a formal nomination committee. Many of their independent directors serve concurrently on the boards of multiple companies in the CK Hutchison group of companies, ISS said.
ISS is among the most influential proxy advisory firms providing corporate governance advice to fund managers, covering about 38,000 companies in 115 markets. The Financial Times reported that another influential proxy adviser, Glass Lewis & Co., also recommended investors to vote against the deal.
Britain's prime minister had a message for voters back home, and for politicians around the EU. But what was it?
Prime Minister David Cameron began his formal renegotiation of Britain’s membership of the EU on Tuesday with a speech in London. Here are the key passages, and what they meant.
by R Hutton
The Push for Reform
“Almost three years ago, I made a speech about Europe. I argued that the European Union needed to reform if it was to meet the challenges of the 21st Century. I argued that Britain’s best future lay within a reformed European Union, if the necessary changes could be agreed. And I promised the British people that, if I was re-elected as Prime Minister, we would have an In-Out referendum.”
Translation: Forget “the British people”, who are broadly unconcerned about the EU. This was a promise made to the Conservative Party. There was a time when Cameron used to warn Conservatives against "banging on about Europe", but in 2013, he surrendered and gave them what they wanted. This speech set out how he’s dealing with the consequences of that.
The Concerns of Britain
“Today I am writing to the President of the European Council setting out how I want to address the concerns of the British people and why I believe that the changes that Britain is seeking will benefit not just Britain, but the EU as a whole.”
Translation: It may be that Cameron’s fellow EU leaders think that the last thing they need on top of a migrant crisis and the Euro crisis is a Brexit crisis. His message to them was: “There’s a way in which this could be good for all of us. Honestly.”
Statesman on Display
“Britain has contributed in full measure to the freedom that Europe’s nations enjoy today. Across the continent, from Ypres to Monte Cassino, from Bayeux to Arnhem, in stone cold cemeteries lie the remains of British servicemen who crossed the Channel to help subjugated nations throw off the tyrant’s yoke…”
Translation: Remind you of any other British prime ministers? Here’s a hint: “From Stettin in the Baltic to Trieste in the Adriatic.” Think Homburg and cigar.
“...and return liberty to her rightful place on what Churchill called ‘this noble continent’.”
That’s the chap.One Market, Lots of Currencies
“Non-Euro members like Britain which are outside the eurozone need certain safeguards in order to protect the single market and our ability to decide its rules and to ensure that we face neither discrimination nor additional costs from the integration of the eurozone.”
Translation: The rest of the EU may think the U.K.’s finance sector is overgrown and out of control, but the U.K. thinks theirs is tiny and over-regulated, and doesn’t want to be made to follow.
“There should be no discrimination and no disadvantage for any business on the basis of the currency of their country. The integrity of the Single Market must be protected.”
Translation: No, they can’t have the currency traders, either.Ever Closer Union (Not)
“We are a proud, independent nation. We intend to stay that way. So we need to be honest about this. The commitment in the Treaty to an ever closer union is not a commitment that should apply any longer to Britain. We do not believe in it. We do not subscribe to it.”
Translation: These may seem like just words, but they are words that Euroskeptics talk about a lot.Friends With or Without Benefits
“We have proposed that people coming to Britain from the EU must live here and contribute for four years before they qualify for in work benefits or social housing. And that we should end the practice of sending child benefit overseas. Now, I understand how difficult some of these welfare issues are for other Member States. And I am open to different ways of dealing with this issue.”
The climbdown: This is the trickiest part of what Cameron is asking for, and he’s offering EU partners a way out: They need to give him something that he can sell as “controlling immigration”.
by R Hutton
Deal Or No Deal
“I have every confidence that we will achieve an agreement that works for Britain and works for our European partners. And if and when we do so, as I said three years ago, I will campaign to keep Britain inside a reformed European Union. I’ll campaign for it with all my heart and all my soul, because that will be unambiguously in our national interest.
“But if we can’t reach such an agreement, and if Britain’s concerns were to be met with a deaf ear, which I do not believe will happen, then we will have to think again about whether this European Union is right for us. As I have said before – I rule nothing out."
The threat: Cameron insists he’s not bluffing about possibly backing a “Leave” vote.
“But just as those who are advocating staying in the EU at all costs have to answer serious questions so those who think Britain should just leave now also need to think hard about the implications of their arguments – and the possible risks of the course they advocate.”
Cameron’s message to voters: “There are lunatics on both wings of this argument. I’m like you, a sensible pragmatist.National Insecurity
“In 2015, our membership of the European Union is not just a matter of trade and commerce, of pounds and pence. It is about our national security as well as our economic security. The world is undoubtedly a more dangerous place than when I made my speech at Bloomberg three years ago.”
Translation: The prime minister isn’t saying that if Britain votes to leave the EU, terrorists will set off a nuclear bomb in Trafalgar Square. But he can’t rule it out.
“When Russia invaded Ukraine, and European leaders met, it was Britain that pushed through sanctions to penalise Russia and ensure a robust response. On Iran, it was Britain that helped impose the tough sanctions which got Iran to the negotiating table. These things were done through the EU.”
Note to readers: The EU is an international group where Russia doesn’t have a veto.
“I am not saying for one moment that Britain couldn’t survive outside the European Union. Of course we could.”
Note the choice of language: Britain could “survive” outside the EU. Deliveries of fresh water and foodstuffs would continue across the country, however people vote.
“The question is whether we would be more successful in than out? Whether being in the European Union adds to our economic security or detracts from it? Whether being in the European Union makes us safer or less safe?
“It will be your decision whether to remain in the EU on the basis of the reforms we secure, or whether we leave. Your decision. Nobody else’s. Not politicians’. Not Parliament’s. Not lobby groups’. Not mine.
“Just you. You, the British people, will decide.
“At that moment, you will hold this country’s destiny in your hands."
No pressure, voters: But you hold your grandchildren’s future in your hands, and it’s a cold, scary world out there.
Seconds Out
“To those who suggest that a decision in the referendum to leave would merely produce another stronger renegotiation and then a second referendum in which Britain would stay I say think again. The renegotiation is happening right now. And the referendum that follows will be a once in a generation choice. An in or out referendum. If we vote to leave, then we will leave. There will not be another renegotiation and another referendum.”
Translation: Boris Johnson’s been saying Britain could have a second referendum if it voted to leave. Cameron is pointing out that he’s prime minister, and Johnson isn’t.
“I say to those who are thinking about voting to leave. Think very carefully, because this choice cannot be undone.”
Translation: It’s scary out there. Did the prime minister mention that at all?
$1 Billion of Shares Frozen as China Hedge Fund Boss Xu Probed
Chinese police have frozen $1 billion of shares in listed companies as authorities probe Xu Xiang, one of the nation’s best-known hedge fund bosses, for alleged insider trading and stock manipulation.
Authorities slapped a two-year freeze on 90 million shares held by Xu’s Zexi Investment in Shanghai-based developer Deluxe Family Co., according to a stock-exchange statement from Deluxe on Tuesday night. At yesterday’s closing price, that stake was worth 1.16 billion yuan ($182 million.)
In the eastern city of Ningbo, another firm also reported a lock-up, adding to restrictions earlier imposed on stakes held by Xu’s mother, Zheng Suzhen. Zheng hasn’t been named by the authorities as being under investigation. The total value of stakes frozen in four companies is $1 billion, based on Tuesday’s closing prices.
Xu, known in China as “hedge fund brother No. 1,” is one of the targets in a wave of investigations as the governments tries to assign blame and clean up the market after a summer stock rout. He was detained on the highway between Shanghai and Ningbo on Nov. 1, China National Radio reported.
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No comment has been available from Xu, whose firm Zexi managed four of China’s top-10 performing hedge funds between June and August, according to Shenzhen Rongzhi Investment Consultant Co. He couldn’t be contacted on Wednesday through calls to his mobile phone number and to Zexi’s offices in Shanghai and Beijing.
On Tuesday night, department-store firm Ningbo Zhongbai Co. told Shanghai’s stock exchange that the police froze 35 million shares owned by Tibet Zetian Investment Development Co. Bloomberg was unable to contact Tibet Zetian through a telephone number listed on company registration records.
In its statement, Ningbo Zhongbai also said that Ningbo Zhongbai’s Chairman Xu Jun and a director of the company, Zhao Yibo, couldn’t be contacted. On Nov. 3, Ningbo Zhongbai had said that it was unable to reach Chairman Xu and its controlling shareholder, Xu Boliang, to verify their personal connections with Xu Xiang.
Corruption checks are taking place across China’s financial industry as the Communist Party’s Central Commission for Discipline Inspection vets regulators, the nation’s biggest banks, and sovereign-wealth fund China Investment Corp. Those checks add to post-rout probes that have snared executives from Citic Securities Co., the nation’s top brokerage, and a senior official at the China Securities Regulatory Commission.
The Mitsubishi Regional Jet, Japan’s first new passenger plane in more than half a century, will make its first flight this week. The aircraft will compete directly with planes from Canada’s Bombardier Inc. and Brazil’s Embraer SA that have fewer than 100 seats and are popular on routes to regional cities from hub airports.
by C Cooper
Here are five things you should know about the jet.It offers more headroom than its rivals (just)
The aircraft, which can seat as many as 92 people, offers more headroom than similar planes. At 2.03 meters, it narrowly edges out the 2 meters for the 88-seater Embraer E175 and the 1.89 meters for the 90-seater Bombardier CRJ900.
It's already more popular than Japan's last plane
More than twice as many of these jets already have been sold as Japan’s previous passenger aircraft — a 64-seat propeller plane that ended production in 1974 — when options and rights are included.
by C Cooper
There are cheaper ways to travel
The MRJ90 has a list price of $47.3 million — approximately as much as 1,700 Toyota Prius cars.
It's lightweight (depending on which scale you use)
The MRJ’s maximum takeoff weight is 94,358 pounds (42,800 kilograms), relatively light compared to the 103,600 pounds for the 19-seat Gulfstream G650ER. Still, that’s about 180 times the weight of sumo wrestler Akebono, the first non-Japanese to reach the sport’s highest rank.
Traveling across the U.S. or Europe? You could be on one soon
The plane’s maximum range of 1,780 nautical miles (3,310 kilometers) would allow it to fly between, say, New York and Denver. The biggest buyers of the plane are U.S. commuter carriers SkyWest Inc. and Trans States Airlines Inc. — both of which have hubs in Denver. Mitsubishi also hopes the plane will be popular for routes in Europe.
Japan Government Approves Mitsubishi Regional Jet's First Flight
Japan’s government gave approval for Mitsubishi Aircraft Corp.’s new passenger jet to fly, opening the way for its first flight in the week of Nov. 9.
by C Cooper
Mitsubishi Aircraft will perform high-speed taxiing tests and evaluations before the first flight, the company and its parent, Mitsubishi Heavy Industries Ltd., said in a statement Thursday.
The planemaker, based at Nagoya airport in central Japan, said last month it would put off the first flight to November, its fifth delay, to make improvements to a flight pedal in the cockpit. Mitsubishi Aircraft has tapped bullet-train specialists to ensure the completion of the jet as it competes with Brazil’s Embraer SA and Canada’s Bombardier Inc. in the market for planes with fewer than 100 seats.
The company has won 407 orders, including options and purchase rights, for its two types of planes, which seat 78 to 92 passengers. ANA Holdings Inc., Japan’s largest airline, is the first buyer, while the two biggest customers are SkyWest Inc. and Trans States Airlines Inc. in North America.
Schelling Says EU Needs December Decision on Transaction Tax
European Union nations need to decide by next month on whether a financial-transactions tax is possible among participating countries, Austrian Finance Minister Hans Joerg Schelling said.
by S Bodoni & R Christie
Schelling, who leads the group of 11 nations that have signed up to design a joint FTT, said he’ll aim to submit a report in December to all 28 EU nations. So far, he said, talks among participating nations have yielded “clear progress” but also no deal.
“I suppose it’s necessary that we can have a solution” when EU finance ministers meet again on Dec. 8, he told reporters in Brussels on Tuesday. “If there is no solution then, one should discuss just as openly that no decision could be reached. At this stage we still believe a solution is possible.”
Italy continues to push for the tax to include sovereign debt derivatives, while most other nations have agreed to exclude those derivatives along with government bonds, Schelling said. Meanwhile, Slovenia and Estonia want the tax to have a broader cross-border reach to ensure it would raise sufficient revenue to be worthwhile, he said.
“There are two countries that have a different view on the territoriality -- here the question is whether one can or will only tax the shares of the 11 states that are part of this in-depth work, or also beyond that,” Schelling said. Slovenia and Estonia “are both very small countries with small financial markets” so their concerns make sense, he said.
Plans for a transaction tax already failed among all 28 EU nations, and the current talks are seeking a compromise among a smaller group that sought to press on under “enhanced cooperation” rules, which require consensus from at least nine nations. Work continues to try to reach an accord among those still participating, Schelling said.
“In general, everybody is committed to implement the project, but there are of course conditions to realize such a project,” Schelling said. “That’s why the technical side and the political decision can’t be separated. It might sound technical, but in reality it’s a political principled decision that has to be taken.”
The 11 participating nations met Monday night after a euro-area finance ministers’ meeting to discuss the state of play. Spanish Economy Minister Luis de Guindos told reporters after the meeting that advances have been made and that there was consensus that derivatives on government debt would not be included in the tax’s scope.
