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Asia shares slip, dollar shaky as investors anxious before U.S. election

 

Pedestrians are reflected in an electronic board showing the graph of the recent fluctuations of the Tokyo Stock Exchange Stock Price Index (TOPIX) outside a brokerage in Tokyo, Japan, May 28, 2015.REUTERS/Yuya Shino

Asia shares slip, dollar shaky as investors anxious before U.S. election

Asian shares slipped on Friday and the dollar nursed losses in a week marked by growing uncertainty about the outcome of the U.S. presidential election.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS slipped 0.4 percent after brushing its lowest levels since early August. It looked set for a loss of 1.7 for the week.

Investors have been unnerved in recent days by signs that the presidential race between Democrat Hillary Clinton and Republican Donald Trump may be tightening just days before Tuesday’s vote.

That anxiety has rippled across global financial markets as investors ponder hedging the possible ramifications of a Trump presidency, overshadowing other events including Friday’s U.S. employment report for October.

“This negative sentiment is also spilling over into Europe’s markets as they also slip back as the weaker U.S. dollar pushes up the pound and the euro, as we look again at the potential for another negative open this morning,” wrote Michael Hewson, chief market analyst at CMC Markets in London.

CMC expects Britain’s FTSE 100 .FTSE, France’s CAC 40 .FCHI and Germany’s DAX <.GDAXI to all open down moderately lower.

According to the latest Reuters/Ipsos States of the Nation project, Clinton, who is seen as the status quo candidate by markets, maintained her narrow lead over Trump.

But several swing states that the Republican challenger must win shifted from favoring Clinton to toss-ups, offering Trump a possible route to victory.

“Even if opinion polls show that Clinton is maintaining a lead, anything can happen at the last minute, something the Brexit outcome taught us,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities, referring to Britain’s surprising vote in June to leave the European Union.

Trump, a political novice, has campaigned to clamp down on immigration, rethink trade relations and slap high tariffs on imported goods. Some fear his election would pose risks for global trade and growth.

On Wall Street on Thursday, U.S. stocks sagged, with the S&P 500’s .SPX eighth straight losing session marking its longest streak since the 2008 financial crisis. A slump in Facebook shares (FB.O) and the U.S. election jitters sapped investor confidence.

Japan’s Nikkei stock index .N225 slid 1.3 percent, reopening after a public holiday on Thursday and catching up to losses in the previous global session. It was down 3.1 percent for the week, the biggest weekly drop in four months, dragged down by the resurgence of the perennial safe-haven yen.

The dollar clawed back some lost ground against the yen, rising 0.2 percent to 103.19 JPY= and pushing away from the previous session’s one-month low of 102.54 yen, though still down 1.5 percent for the week. The euro EUR= edged down 0.1 percent to $1.1097 EUR=, up about 1 percent for the week.

The dollar index, which tracks the greenback against a basket of six rival currencies, inched up 0.1 percent to 97.244 .DXY, down 1.1 percent for the week and not far from a more than three-week low of 97.041 struck overnight.

The nonfarm payrolls report due later Friday is expected to show employers added 175,000 jobs in October, according to the median estimate of 106 economists polled by Reuters. [ECONUS]

U.S. data on Thursday showed that services industry activity cooled last month amid a slowdown in new orders and hiring, while planned job cuts by U.S.-based employers dropped 31 percent to a five-month low.

That underscored the labor market’s healthy fundamentals, though more Americans filed for unemployment benefits last week.

The pound was a stand-out performer overnight, rising to a nearly one-month high of $1.2494 GBP= on Thursday after a British court ruled that the government needs parliamentary approval to start the process of leaving the European Union. That could potentially delay Prime Minister Theresa May’s Brexit plans.

The pound also got a boost from the Bank of England, which scrapped its plan to cut interest rates and ramped up its forecasts for growth.

Sterling was last up slightly at $1.2465, poised to gain 2.3 percent for the week.

Oil prices took back some ground after settling down more than 1 percent on Thursday as investors reacted to a record weekly surge in U.S. crude inventories and remained skeptical that OPEC will actually implement its planned output curbs.

U.S. crude CLc1 added 0.3 percent to $44.79 per barrel. Brent crude LCOc1 also rose 0.3 percent to $46.47.

(Additional reporting by Ayai Tomisawa; Editing by Shri Navaratnam and Kim Coghill)

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Published at Fri, 04 Nov 2016 06:40:05 +0000

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“How do I protect myself if Trump is elected?”

 

“How do I protect myself if Trump is elected?”

by Bill McBride on 10/30/2016 12:01:00 PM

 Quite a few readers have asked me this question. My usual answer is that I expect Ms. Clinton to be elected President, and that the expansion will continue.

I’ve spoken to several key analysts and economists, and for their forecasts, all are assuming Ms. Clinton will be the next President (my forecasts also assume a Clinton presidency).  So if Trump is elected, expect some market volatility as forecasts are changed.  As Merrill Lynch recently noted:

“As our strategists have noted, the initial reaction to a potential Trump victory would likely be a risk-off event in the markets, which we think could end up delaying the Fed from hiking in December.”

That is just a guess at the short term reaction.  The general rule is don’t invest based on your political views. 

However policy does matter for investing and the economy.  As an example, it was obvious to invest in oil when George W. Bush became President.  And insurance companies like United Healthcare and Aetna seemed like good bets with a President Obama.

Another example of policy is the deregulation of banks (and the anti-regulation attitude of the Bush administration) as part of the housing bubble story.

But what about with Mr. Trump?  He has said he’d “build a wall” along the border with Mexico, renegotiate all trade deals, cut taxes on high income earners, repeal Obamacare and more.   But it is unclear what he’d actually do as President.   As an example, no one really thinks a wall will be built along the entire border (maybe sections of a wall – and Mexico wouldn’t pay for it).

Repealing the ACA – without a replacement – would lead to many millions of Americans without health insurance.  And those with preexisting conditions would be uninsurable.   This seems politically unlikely (without a replacement policy), but if it happens, sell those health insurance companies.

Right now it is hard to guess what policy would look like with Mr. Trump (Trump doesn’t seem to understand policy issues – like his ignorant comments on the VAT while talking about trade with Mexico).  One key concern with Trump is the potential for a trade war – and that could happen almost without warning.

Long time readers remember when I used to write about the impact of policy (both good and bad), but there hasn’t been much policy to discuss for the last few years.  If Trump is elected, I’d expect a GOP sweep, and then I’ll be writing frequently about policy again.  Since Trump is at war with the data (he rejects data that doesn’t fit his views), I don’t expect evidence based policy proposals – and that almost always means bad results.

Until we see the actual policy proposals, it is hard to predict the impact.  I will not predict a recession just because Trump is elected, but I do think the economy would perform better under Clinton than Trump.

Also, the words of a President matter.  Mr Trump has been reckless and irresponsible with his comments, and that would probably continue. One absurd comment could send the markets into a tailspin (and that could happen at any time).   That should make investors more cautious (as an example, I’m recommending that my home builder friends ease back on their spec building if Trump is elected).

In conclusion: I expect Ms. Clinton to be elected and I’m currently taking no action to protect myself against the risks of a Trump presidency.    The risks are real, but I think the odds of Trump winning are very low.  If the unimaginable happens, I’ll be writing about when to head to the bunker.

Read more at http://www.calculatedriskblog.com/2016/10/how-do-i-protect-myself-if-trump-is.html#rmeWXR1VuyxILPR1.99

by Bill McBride on 10/30/2016 11:42:00 AM

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Published at Sun, 30 Oct 2016 15:42:00 +0000

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The Rape of America — The Core Federal Election Issue

 

The Rape of America — The Core Federal Election Issue


The 2016 US presidential election between leading candidates Republican Donald Trump and Democrat Hillary Clinton has been unusual in that allegations of rape have cropped up during the campaign with Bill Clinton accused of rape, Hillary Clinton accused as an accessory, and Donald Trump accused of groping women without their consent. However, the core issue of the campaign — indeed the reason the Trump campaign exists — is citizen anger at a growing sense that their country itself has been abused at the hands of a financial elite.  And this core campaign issue is lost as the back and forth sexual recriminations between the campaigns deflects attention from a critical issue.1

Something’s Wrong — And It’s Big

But citizens increasingly know something is wrong – and that realization is despite soaring stock markets and bond markets since the Great Financial Crisis of 2008.

The current US administration promotes an unemployment rate of 5% (down from 10% in 2009) as a sign that the economy has recovered from the Great Financial Crisis.

Flying in the face of this promotion is the fact that the number of adults not in the US labor force is 94 million people in September 2016 up from 80 million not in the labor force in October 2008. Excluding 14 million people from the US labor force so that they are not counted as unemployed helps to statistically reduce the unemployment rate.

And 41 million Americans now remain on food stamps up from 28 million in October 2008.

These statistics, and there are many more, show us that despite soaring financial markets fuelled by the Fed’s 0% interest rates, there is no real recovery underway.  Soaring financial markets with moribund labor markets and rising prices for essential goods do not signal a healthy economy. Donald Trump knows it as do US voters.

On September 5, 2016 Trump warned that the Federal Reserve had kept rates artificially low and “It’s an artificial market. It’s a bubble.” warning that the bubble economy that the Federal Reserve has created had resulted in “very scary scenarios”. On September 6 Clinton immediately responded to Trump by saying that “presidents and candidates should not comment on Fed actions”.  It was also revealed on September 6 that Goldman Sachs was banning partners from contributing to Trump’s campaign from September 1 forward.

The Rape of America (and Europe and Canada)

By (correctly) identifying the Fed as the source of economic distortions and the coming crash and impoverishment of the American people, Trump was alarming many in the financial industry by lighting fires of inquiry that cannot be put out. And the trail of evidence leads back not only to the Fed but to Goldman Sachs as well.

The rape of America has been a relatively simple process and involves a few key elements:

1) A debt-based currency system run by the central bank.

With a debt-based currency system and the ability of banks to instantly credit money into creation, the age-old formula of blowing bubbles can be effected by continually lowering interest rates and increasing the amount of currency in circulation thus driving speculation continually higher. This creates Trump’s “artificial markets”.

2) Recognize the inverse relationship between real interest rates and gold prices

Gold has historically limited the ability of central banks to blow bubbles by soaring in price. Former Clinton administration Treasury Secretary Larry Summers in his seminal 1985 paper with Barsky identified that the primary factor driving real gold prices was real interest rates (i.e. nominal interest rates minus the inflation rate). As inflation rises from loose central bank monetary policy, the real price of gold measured in constant dollars also rises and is the principal “tell” of those loose monetary policies. The principal driver of consumer goods inflation is monetary policy — as more money is created, goods prices also become more expensive. Indeed, the US dollar now buys 1% of what it could buy in 1913 when the Fed was created. But as was seen in the late 1970s, when inflation rages gold rages more. Central bankers are then forced to choose between abandonment of their paper money and bonds for real assets or to stop their money printing.

Now, Summers and Barsky were so certain of their observation that they wrote “(t)he negative correlation between real interest rates and the real price of gold that forms the basis for our theory is a dominant feature of actual gold price fluctuations.” [“Gibson’s Paradox and the Gold Standard“, Summers and Barsky, 1985 NBER working paper 1680 http://www.nber.org/papers/w1680.pdf].  The principal driver of the gold price was real interest rates — as they collapse due to inflation, the price of gold soars. The implication is that if you would like to sustain loose monetary policy for a protracted period, it is necessary to be able to control the price of gold.

And as we will see, the ability to control the bond market was almost lost in the late 1970s as both inflation and the price of gold soared forcing nominal interest rates up to the high teens before gold’s rise was arrested.

3) Convert the world’s principal gold markets from trading gold to trading paper gold thereby short-circuiting price discovery in the global gold and bond markets

The central characteristics of gold are that it is rare and of universally of value — gold has a 4,000 year history as a monetary asset as it cannot be debased or created without limit as fiat paper money can. With the 1987 creation of the London Bullion Market Association (LBMA) by the Bank of England (https://www.bullionstar.com/blogs/ronan-manly/from-bank-of-england-to-lbma-the-independent-chair-of-the-lbma-board/), gold trading was progressively thereafter converted to paper contract trading through the creation of “unallocated gold contracts” without gold backing and price discovery was thereby thwarted as these contract claims on gold can themselves be created and traded without limit (http://www.safehaven.com/article/42600/transition-of-price-discovery-in-the-global-gold-and-silver-market).  By deflecting claims for gold into paper gold contracts, today there are an estimated 400 million to 600 million oz of claims for gold at the LBMA without gold backing and daily gold trading has reached 200+ million oz of gold per day (vs global annual gold mine production of ~ 100 million oz).

Price discovery of gold, and the ability of the price of gold to respond to real interest rates, has thus been greatly arrested — the knock-on and targeted effect was that the bond market was also short-circuited allowing the secular reduction of interest rates (and creation of mountains of debt in our debt-based economies). Central bankers could now defy gravity — for a while.

The following graph using the Bureau of Labor Statistic’s consumer price index (CPI) method of calculating inflation from 1980 held constant shows the 1987 decoupling of the price of gold’s historic inverse relationship with real interest rates with the creation of the LBMA — gold no longer responded by rising in price as real interest rates became negative and central banks were free to blow bubbles. Note also in the graph (where the inverse price of gold is plotted on the right) that in late 1982 the price of gold started to surge driving real interest rates to almost 9% higher than the rate of inflation before money started to return to bonds from gold.


Source: Reginald Howe, GoldenSextant.com. 1980 CPI computations by John Williams at shadowstats.com

Another issue given Goldman Sachs response of banning Goldman partners from donationing to the Trump campaign is the key role of Goldman Sachs’ subsidiary J. Aron and Co. gold traders in advising central banks to sell and lease gold in the 1990s. Former gold banker and author Ferdinand Lips wrote at pages 123 to 124 in his book Gold Wars — The Battle Against Sound Money From a Swiss Perspective that he came to recognize in 1996 that Goldman’s J.Aron and Co. were the central advisors to central banks behind their gold policy to agressively sell and lease gold into the market — thereby further depressing the price of gold (http://www.safehaven.com/article/35086/the-role-of-goldmans-jaron-and-co-metal-division-in-capping-gold-prices). Mr. Trump’s reference to a bubble economy driven by central banks and artificially low interest rates leads inexorably back to Goldman Sachs and the LBMA.

4. Now, continually lower interest rates over the next 30 years creating a succession of financial bubbles — when the bubbles pop, bail-out the banks and not borrowers

With gold no longer properly signalling artificially low interest rates by central banks this enabled the creation of a of a fake bubble economy as identified by Trump. When you rig the global price of gold, you rig the global bond market.   Global credit market borrowing now totals $230 billion or 340% of global GDP more than double the historically sustainable level of 150% of GDP.

Central bankers have responded to the succession of bubbles and financial crises of their own creation by bailing-out the banks (lending up to $16 trillion to banks during the Great Financial Crisis) and prescribing lower interest rates and more debt compared to the needed monetary system reform and debt write-down to stabilize our economy. And Alan Greenspan who was appointed to the Fed in 1987 has retired and has been knighted as Sir Alan Greenspan by the UK establishment. A job well done.

The Bubbles are Popping but the Debt Remains

With the creation of the debt bubble and the consequent sequence of financial and economic bubbles, the US economy is now so distorted by Fed policy that even with the zero interest rates the economic output is growing at 1% and is declining. We are at the terminus point of exceptionally loose money started in 1987 by the Bank of England and the Federal Reserve.

With assets stripped from their hands and large numbers of Americans out of work and on food stamps, Mr. Trump’s words have not elicited reasoned discussion.   Not only has Trump been told not to talk like that but the recriminations back and forth of sexual impropriety have stopped discussion of this core campaign issue reflecting American voter concern. And the hackneyed accusation of anti-semitism against Trump further muddies the waters  (http://wallstreetonparade.com/2016/10/new-york-times-writer-suggests-donald-trump-is-an-anti-semite-for-his-reference-to-banking-conspiracy/) and with hedge fund donations to Trump totalling $19,000 vs 48.5 million for Clinton, we get some sense of the Candidate reflecting the interests of Wall Street. And this mirrors the Obama administration which executive structure was determined by Citibank (http://wallstreetonparade.com/2016/10/wikileaks-bombshell-emails-show-citigroup-had-major-role-in-shaping-and-staffing-obamas-first-term/).

The question now remains whether there will be any further discussion of this key issue broached by Trump and reform forced by the electorate or whether America will proceed with its politicians bickering about sex as the financial, economic and monetary system proceeds over the waterfall.


Notes:

1. The well documented alleged rape of nursing administrator Juanita Broaddrick in 1978 by former President Bill Clinton and Broaddrick’s subsequent intimidation into silence by Democratic candidate Hillary Clinton has revolted many long-time Democratic supporters (for a catalogue of some of Bill Clinton’s alleged crimes against women see: https://www.lewrockwell.com/2016/01/roger-stone/clintons-criminals/).  And Hillary Clinton’s successful 1975 legal defence leading to the release of a rapist who raped 12 year old Kathy Shelton and audio tapes of Clinton laughing at the process as well as her using a defence that the child had a “tendency to seek out older men and engage in fantasizing.” leaves observers disgusted.   The tape recording of Republican candidate Trump bragging about what women let a star like him do to them as well as the fusillade of accusations by women of unwanted groping and kissing by the Republican further leaves voters shocked — and not thinking. And more allegations are sure to follow in this political season.


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David B. Jensen, P.Eng., LL.B., MBA
Vancouver, BC
Canada

David Jensen

David Jensen, P.Eng., LL.B., MBA, is a Professional Engineer with a degree in Engineering from the University of Waterloo in Canada (1987). He worked through 1993 on the F-5 Fighter Overhaul program and the Bombardier Regional Jet programs. Mr. Jensen then graduated with a LL.B. degree in corporate and commercial law from the University of Calgary (1997) and an MBA from Univ. of B.C., majoring in Logistics and Supply Chain Management (1999). Returning first to aviation then, after reading Austrian School Economics, Mr. Jensen transitioned to the mining industry from the aerospace industry in 2004 first through his mining industry consultancy, then as Vice President of Corporate Development for Western Copper Corp., and most recently as President and COO of Skyline Gold. Mr. Jensen currently serves as President and COO of a private mining company and provides strategic, operational, risk assessment, and precious metals consulting services through his consultancy, Jensen Strategic.

Copyright © 2005-2016 David Jensen. All rights reserved.

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Published at Mon, 17 Oct 2016 09:34:59 +0000

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Transcripts of Clinton’s Wall Street talks released in new Wikileaks dump

Transcripts of Clinton’s Wall Street talks released in new Wikileaks dump

U.S. Democratic presidential nominee Hillary Clinton greets people at a campaign office in Seattle, Washington, U.S. October 14, 2016.REUTERS/Lucy Nicholson
By Emily Stephenson and Luciana Lopez

U.S. Democratic presidential candidate Hillary Clinton’s full remarks to several Wall Street audiences appeared to become public on Saturday when the controversial transparency group Wikileaks dumped its latest batch of hacked emails.

The documents showed comments by Clinton during question-and-answer sessions with Goldman Sachs Chief Executive Lloyd Blankfein and Tim O’Neill, the bank’s head of investment management, at three separate events in 2013 in Arizona, New York and South Carolina.

Some excerpts of Clinton’s speeches had already been released. For more than a week, Wikileaks has published in stages what it says are hacked emails from the account of John Podesta, Clinton’s campaign chairman.

Clinton’s campaign has declined to verify the emails. Goldman Sachs did not immediately provide any comment on Saturday.

Clinton came under fire for months for not releasing full details of her paid speeches to big business audiences, as opponents accused her of a cozy relationship with bankers and other members of the U.S. financial system.

The excerpts that have surfaced so far angered voters who backed Clinton’s former Democratic opponent, U.S. Senator Bernie Sanders, who endorsed her after losing the party’s primary.

Few of these voters are expected to vote for Republican nominee Donald Trump, who is dealing with his own larger scandal after the release last week of a 2005 video in which he bragged about making unwanted sexual advances toward women.

But Democratic strategists worry that disappointment with Clinton could hurt turnout in the Nov. 8 election among liberals and younger voters, posing a potential problem for the former secretary of state.

In the email released on Saturday containing the transcripts, Clinton campaign staff highlighted sections that could pose problems, including saying “political reasons” factored into passing the 2010 Dodd-Frank law on Wall Street reforms and, while talking about regulation, saying the people who work in the industry know it best.

(Reporting by Emily Stephenson and Luciana Lopez; Editing by Leslie Adler)

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Published at Sat, 15 Oct 2016 22:04:42 +0000

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A Parable for November

https://pixabay.com/en/users/Unsplash-242387/https://pixabay.com/en/users/Unsplash-242387/

A Parable for November

You have a cross-country trip to take, and it’s a must-do trip.  You have to leave immediately and all that are available is a charter plane and your choice of two available pilots.  The first pilot has flown this plane before but has a longstanding negative reputation as being someone who will overcharge you and most likely take you to unannounced stops before (possibly) arriving at your destination.  The second pilot loudly announces how great the ride will be and how dishonest the other pilot is, but has never flown a plane before.

Must-do trip.

Two pilots.

Your choice.

Further Reading:  Why Character Matters
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Published at Mon, 10 Oct 2016 11:53:00 +0000

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Wall Street rises as Clinton seen winner of second debate

Wall Street rises as Clinton seen winner of second debate

 

 

Traders work on the floor of the New York Stock Exchange (NYSE) as the market closes in New York, U.S., October 3, 2016. REUTERS/Lucas Jackson
By Caroline Valetkevitch

Wall Street rose on Monday morning amid gains across most sectors, driven by oil prices, and as Democrat Hillary Clinton was widely seen as the winner of the second presidential debate.

A Clinton presidency would be more positive for the markets because her positions are more well known than those of her Republican rival Donald Trump, according to a Reuters poll.

A CNN/ORC snap poll of debate watchers found that 57 percent thought Clinton won the encounter, versus 34 percent for Trump.

Oil prices rose 2.8 percent and touched their one-year high as speculators raised bets that prices would gain on the back of an agreement among OPEC producers to rein in record output levels. [O/R]

“Investors will ponder the presidential debate and follow the events in the commodity markets, especially oil,” said Peter Cardillo, chief market economist at First Standard Financial in New York.

 

Investors are also bracing for the third-quarter earnings season, which unofficially kicks off on Tuesday when aluminum producer Alcoa (AA.N) reports.

“The markets seem to be looking for a repeat of last quarter, with most companies exceeding Street consensus but obviously on a scaled back earnings growth,” Cardillo said.

Earnings of S&P 500 companies are expected to drop 0.7 percent, according to Thomson Reuters data.

The dollar .DXY, which has been swinging between gains and losses for the past five trading days, was up 0.2 percent against a basket of major currencies. The pound GBP=fell again on Monday.

The U.S. bond market was closed for the Columbus Day holiday.

At 9:39 a.m. ET (1339 GMT), the Dow Jones Industrial Average .DJI was up 127.61 points, or 0.7 percent, at 18,368.1.

The S&P 500 .SPX was up 12.42 points, or 0.58 percent, at 2,166.16 and the Nasdaq Composite .IXIC was up 34.29 points, or 0.65 percent, at 5,326.70.

Ten of the 11 major S&P 500 indexes were higher, led by a 1.36 percent rise in the energy sector .SPNY. Telecom service providers .SPLRL were the lone losers.

Exxon (XOM.N) and Chevron (CVX.N) were among the top influences on the S&P and the Dow

Twitter (TWTR.N) dropped 12.3 percent after Bloomberg reported on Saturday that “top potential bidders” had lost interest in the company.

Mylan (MYL.O) was the top gainer on the S&P, rising 11.4 percent. The drugmaker on Friday said it would pay $465 million to settle questions over whether it underpaid U.S. government healthcare programs by misclassifying its EpiPen emergency allergy treatment.

Merck (MRK.N) rose 2.1 percent after clinical data showed its Keytruda immunotherapy offered big benefits in previously untreated lung cancer patients, either when given on its own or with chemotherapy.

Advancing issues outnumbered decliners on the NYSE by 2,314 to 369. On the Nasdaq, 1,795 issues rose and 426 fell.

The S&P 500 index showed 15 new 52-week highs and one new lows, while the Nasdaq recorded 56 new highs and seven new lows.

 

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Anil D’Silva)

 

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Published at Mon, 10 Oct 2016 20:56:36 +0000

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UPDATE 1-Markets lean more toward Clinton win after Trump video

 

Republican presidential nominee Donald Trump is reflected in a mirror (R) as he meets with hispanic business leaders during a campaign stop in Las Vegas, Nevada, U.S., October 5, 2016.
By Caroline Valetkevitch and Rodrigo Campos | NEW YORK

Wall Street stock index futures were little changed throughout Sunday’s highly contentious presidential debate, indicating that markets continue to view that Democrat Hillary Clinton holds an edge in the Nov. 8 election against her Republican rival, Donald Trump.

The 90-minute debate got off to a chilly start when Clinton and Trump greeted each other without the traditional handshake.

It quickly turned into an acrimonious discussion of a 2005 video that emerged on Friday in which Trump was heard using vulgar language and talking about groping women without consent.

Investors said there was not enough in terms of policy substance in Sunday’s debate to change the market’s perception of the direction of the race.

“I don’t think it changed people’s opinions in the investing community that Clinton is more likely to win, as she was before the debate, certainly after Friday,” said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey.

In a video released on Friday, Trump is heard talking on an open microphone in 2005 about groping women and trying to seduce a married woman. The video was taped only months after Trump married his third wife, Melania.

“There is still time to go and more things that could happen, but financial advisors are probably starting to feel they need to think about a Clinton win in terms of an investment thesis for 2017,” Meckler said.

He said such a thesis would likely include government intervention in healthcare, particularly medicine prices, and little support for coal as an energy source.

S&P e-mini futures remained in a tight range throughout the debate, slightly higher than at the close on Friday.

“The market declared tonight’s debate a draw and has no more clue after debate than before, at least not in watching the S&P futures. Once again the debate was great theater, but did not give the market any insight,” said JJ Kinahan, chief market strategist at TD Ameritrade.

“Despite the night’s civil ending, it was hard to glean much information, as a good part of the debate was simply a name-calling fest.”

Strategists in a recent Reuters equity poll mostly viewed an election victory on Nov. 8 by Clinton as more positive for the stock market through the end of the year, largely because her positions -unlike her opponent’s- are well known.

Steven Englander, global head of G10 currency strategy at CitiFX in New York, said: “Both Trump and Clinton supporters expected that emerging market currencies and U.S. equities would go down and the VIX .VIX would go up if Trump were to win and vice versa if Clinton wins,” he added.

Trump has been critical of a U.S. trade deal with Mexico and Canada as well as other trade deals, and has promised to build a border wall and make Mexico pay for it.

 

The Mexican peso rose as much as 2 percent on Sunday and was last trading up 1.3 percent versus the greenback. S&P 500 e-minis ESc1, which were up 6 points shortly after opening three hours before the debate began, were up 5.25 points, or 0.24 percent.

“It’s a positive reaction (in stocks), and it’s very consistent with what the market has been discounting, which is that Clinton will win and that’s good news,” said Hugh Johnson, chief investment officer of Hugh Johnson Advisors LLC in Albany, New York, before the debate.

“It’s also saying the House of Representatives will stay in the hands of the Republicans,” he added.

U.S. stocks briefly gained ground following a perceived win by Clinton in the first presidential debate last month.

(Reporting by Caroline Valetkevitch; Additional reporting by Jennifer Ablan; Editing by Alan Crosby, Alistair Bell & Shri Navaratnam)

REUTERS/Mike Segar

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Published at Mon, 10 Oct 2016 01:04:36 +0000

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Kuroda says no change to BOJ’s balance sheet management

Kuroda says no change to BOJ’s balance sheet management

Bank of Japan Governor Haruhiko Kuroda speaks to reporters at the Willard Intercontinental Hotel during the annual meetings of the IMF and World Bank Group in Washington, October 6, 2016.REUTERS/James Lawler Duggan

Oct 8 Bank of Japan Governor Haruhiko Kuroda said on Saturday there will be no significant changes in the management of the central bank’s balance sheet going forward under its new framework.

“From the viewpoint of policymakers, a negative interest rate policy and asset purchases are not mutually exclusive,” Kuroda said in a speech at Brookings Institution.

He also played down the idea by some academics that central banks should raise their inflation targets from 2 percent to around 4 percent to address declines in inflation expectations.

“Based on Japan’s experience, the argument that a central bank can lift inflation expectations of various entities simply by raising its inflation target seems a bit naive to me.”

The BOJ last month shifted its policy target to interest rates from base money, a move some analysts saw as paving a way for a future tapering of the bank’s massive balance sheet. (Reporting by Leika Kihara; Editing by Andrea Ricci)

 

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Published at Sat, 08 Oct 2016 20:23:15 +0000

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IMF members to push spending, revive trade to boost growth

0msUFa.jpgIMF members to push spending, revive trade to boost growth

 

By David Lawder and Leika Kihara
| WASHINGTON

The International Monetary Fund’s member countries on Saturday pledged to revive flagging global trade, boost government spending and remove barriers to business to fight weak growth that has left too many people behind.

 

The pledge came as world finance leaders fretted over a rising populist backlash against trade and globalization at the IMF and World Bank annual meetings in Washington.

“The persistently low growth has exposed underlying structural weaknesses and risks further dampening potential growth and prospects for inclusiveness,” the Fund’s steering committee said in a communique.

Britain’s vote in June to leave the European Union, U.S. Republican presidential candidate Donald Trump’s anti-trade rhetoric and a global slowdown in trade volumes have prompted policymakers to try do a better job selling the benefits of global economic integration to the general public.

The International Monetary and Financial Committee said uncertainty and downside risks to the global recovery were elevated, and that it was increasingly threatened by protectionist policies and stalled reforms.

“We reinforce our commitment to strong, sustainable, inclusive, job-rich and more balanced growth. We will use all policy tools – structural reforms, fiscal and monetary policies – both individually and collectively,” it said.

 

The steering committee, made up of people who represent the fund’s 189 member countries, also included a pledge to “design and implement policies to address the concerns of those who have been left behind and to ensure that everyone has the opportunity to benefit from globalization and technological change.”

IMF Managing Director Christine Lagarde has been urging countries to do more to boost growth, spending more on infrastructure and education where possible and relying less on loose monetary policy that is already reached the limits of its influence. She also has sought more pro-market reforms in many countries

“We certainly decided to come up more loudly on this occasion to say, ‘central bankers cannot be the only game in town,'” Lagarde told a news conference. “Let’s get on with it and see some action on the part of the other authorities as well.”

 

The members repeated their pledge to refrain from competitive currency devaluations, to not target exchange rates for competitive purposes and to clearly communicate their policy stances.

“We will also redouble our commitment to maintain economic openness and reinvigorate global trade as a critical means to boost global growth.”

In addition, the IMF panel said it would “intensify” efforts to deal with bad loans and other financial sector problems left over from the last financial crisis in some advanced countries. The pledge comes as questions over Deutsche Bank’s (DBKGn.DE) financial health also prompted considerable discussion around the talks.

 

The IMF statement said that 26 member countries had pledged $360 billion in bilateral financing that can be used to supplement the Fund’s normal lending resources.

The members agreed with Lagarde’s proposal to delay the next review of the Fund’s “quota” shareholding system by about two years. They pledged to complete the review by no later than October 2019, compared with an original timetable for completion in 2017.

The last quota review, completed in 2010 but only ratified by the U.S. Congress in late 2015, resulted in a greater share for China, Brazil and other major emerging market economies.

(Reporting by David Lawder and Leika Kihara; Editing by Andrea Ricci)

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Published at Sat, 08 Oct 2016 20:19:54 +0000

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UPDATE 1-Odebrecht patriarch leads Brazil plea deal talks -Estado

UPDATE 1-Odebrecht patriarch leads Brazil plea deal talks -Estado

The headquarters of Odebrecht SA is pictured in Sao Paulo, Brazil, March 22, 2016.REUTERS/Paulo Whitaker

The eldest member of Brazil’s Odebrecht family is personally spearheading negotiations between executives of his namesake engineering conglomerate and federal prosecutors for a potential plea deal in Brazil’s biggest-ever corruption probe, O Estado de S.Paulo newspaper reported on Saturday.

According to Estado, patriarch Emilio Odebrecht is leading a team of executives and lawyers of Odebrecht SA that have set up Brasília’s Windsor Plaza hotel as their headquarters for the negotiations. The talks seek to engage as many as 53 Odebrecht executives in cooperation deals with authorities, Estado said.

Representatives for Odebrecht declined to comment on the article.

A Brazilian government official with direct knowledge of the negotiations with Odebrecht acknowledged they were going on, but said, “We’re not even close” to a deal. The official did not provide any other details.

A second Brazilian government official confirmed on Saturday to Reuters that negotiations were in progress.

Odebrecht SA [ODBES.UL] is the largest of Brazil’s engineering firms accused of colluding to overcharge state-controlled oil company Petróleo Brasileiro SA (PETR4.SA) and other state firms for contracts, then using part of that to channel donations and bribes into the former ruling Workers Party and allies.

According to the report, federal prosecutors in charge of the so-called “Operation Car Wash” want Odebrecht SA to pay fines of at least 6 billion reais ($1.9 billion).

Marcelo Bahia Odebrecht, Emilio’s son and the group’s former chief executive, has been in jail since June last year for his involvement in the scandal. Bahia Odebrecht, who has been already sentenced to more than 19 years in prison for participating in the scheme, is willing to collaborate with the probe, Estado said.

Patriarch Emilio and his lawyers are trying to convince prosecutors to allow other group executives to serve shortened sentences in exchange for cooperation, the paper reported, adding that negotiations could last at least another week.

Analysts have said that testimony by Odebrecht executives could broaden the Car Wash investigation.

According to the Estado article, among the executives involved in negotiations is Alexandrino de Alencar, Odebrecht’s former head of institutional relations.

 

($1 = 3.2220 reais)

(Reporting by Bruno Federowski and Brad Brooks; Editing by Guillermo Parra-Bernal and Andrea Ricci)

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Published at Sat, 08 Oct 2016 14:53:01 +0000

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Public and Private Sector Payroll Jobs: Carter, Reagan, Bush, Clinton, Bush, Obama

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By markusspiske from Pixabay

Public and Private Sector Payroll Jobs: Carter, Reagan, Bush, Clinton, Bush, Obama

Public and Private Sector Payroll Jobs: Carter, Reagan, Bush, Clinton, Bush, Obama

by Bill McBride on 10/07/2016 02:43:00 PM

By request, here is another update of an earlier post through the September 2016 employment report including all revisions.

NOTE: Several readers have asked if I could add a lag to these graphs (obviously a new President has zero impact on employment for the month they are elected). But that would open a debate on the proper length of the lag, so I’ll just stick to the beginning of each term.

Note: We frequently use Presidential terms as time markers – we could use Speaker of the House, or any other marker.

Important: There are many differences between these periods. Overall employment was smaller in the ’80s, however the participation rate was increasing in the ’80s (younger population and women joining the labor force), and the participation rate is generally declining now.  But these graphs give an overview of employment changes.

First, here is a table for private sector jobs. The top two private sector terms were both under President Clinton.  Reagan’s 2nd term saw about the same job growth as during Carter’s term.  Note: There was a severe recession at the beginning of Reagan’s first term (when Volcker raised rates to slow inflation) and a recession near the end of Carter’s term (gas prices increased sharply and there was an oil embargo).

 

Term Private Sector
Jobs Added (000s)
Carter 9,041
Reagan 1 5,360
Reagan 2 9,357
GHW Bush 1,510
Clinton 1 10,884
Clinton 2 10,082
GW Bush 1 -811
GW Bush 2 415
Obama 1 1,921
Obama 2 9,1711
144 months into 2nd term: 10,005 pace.

The first graph shows the change in private sector payroll jobs from when each president took office until the end of their term(s). Presidents Carter and George H.W. Bush only served one term, and President Obama is in the final months of his second term.

Mr. G.W. Bush (red) took office following the bursting of the stock market bubble, and left during the bursting of the housing bubble. Mr. Obama (blue) took office during the financial crisis and great recession. There was also a significant recession in the early ’80s right after Mr. Reagan (yellow) took office.

There was a recession towards the end of President G.H.W. Bush (purple) term, and Mr Clinton (light blue) served for eight years without a recession.

image: https://3.bp.blogspot.com/-YMlfzixuzQY/V8mUQeReQuI/AAAAAAAAorM/cb0M2Q-NJTgs4PqOk3SQqCYs5vSs61BbgCLcB/s320/PrivateAug2016.PNG

Private Sector PayrollsClick on graph for larger image.

The first graph is for private employment only.

The employment recovery during Mr. G.W. Bush’s (red) first term was sluggish, and private employment was down 811,000 jobs at the end of his first term.   At the end of Mr. Bush’s second term, private employment was collapsing, and there were net 396,000 private sector jobs lost during Mr. Bush’s two terms.

Private sector employment increased slightly under President G.H.W. Bush (purple), with 1,510,000 private sector jobs added.

Private sector employment increased by 20,966,000 under President Clinton (light blue), by 14,717,000 under President Reagan (yellow), and 9,041,000 under President Carter (dashed green).

There were only 1,921,000 more private sector jobs at the end of Mr. Obama’s first term.  Forty four months into Mr. Obama’s second term, there are now 11,092,000 more private sector jobs than when he initially took office.

image: https://1.bp.blogspot.com/-yugy9PWGGY8/V8mUSoucxsI/AAAAAAAAorQ/4XQLjnCkuugEeyiAnLjILXOY2y7xpWoIwCLcB/s320/PublicAug2016.PNG

Public Sector Payrolls A big difference between the presidencies has been public sector employment.  Note the bumps in public sector employment due to the decennial Census in 1980, 1990, 2000, and 2010.

The public sector grew during Mr. Carter’s term (up 1,304,000), during Mr. Reagan’s terms (up 1,414,000), during Mr. G.H.W. Bush’s term (up 1,127,000), during Mr. Clinton’s terms (up 1,934,000), and during Mr. G.W. Bush’s terms (up 1,744,000 jobs).

However the public sector has declined significantly since Mr. Obama took office (down 398,000 jobs). This has been a significant drag on overall employment.

And a table for public sector jobs. Public sector jobs declined the most during Obama’s first term, and increased the most during Reagan’s 2nd term.

 

Term Public Sector
Jobs Added (000s)
Carter 1,304
Reagan 1 -24
Reagan 2 1,438
GHW Bush 1,127
Clinton 1 692
Clinton 2 1,242
GW Bush 1 900
GW Bush 2 844
Obama 1 -708
Obama 2 3101
144 months into 2nd term, 338 pace

Looking forward, I expect the economy to continue to expand through 2016 (at least), so I don’t expect a sharp decline in private employment as happened at the end of Mr. Bush’s 2nd term (In 2005 and 2006 I was warning of a coming down turn due to the bursting of the housing bubble – and I predicted a recession in 2007).

For the public sector, the cutbacks are over.  Right now I’m expecting some further increase in public employment during the last few months of Obama’s 2nd term, but obviously nothing like what happened during Reagan’s second term.

Below is a table of the top four presidential terms for private job creation (they also happen to be the four best terms for total non-farm job creation).

Clinton’s two terms were the best for both private and total non-farm job creation, followed by Reagan’s 2nd term.

Currently Obama’s 2nd term is on pace to be the 3rd best ever for private job creation.  However, with very few public sector jobs added, Obama’s 2nd term is only on pace to be the fourth best for total job creation.

Note: Only 310 thousand public sector jobs have been added during the forty four months of Obama’s 2nd term (following a record loss of 708 thousand public sector jobs during Obama’s 1st term).  This is less than 25% of the public sector jobs added during Reagan’s 2nd term!

 

Top Employment Gains per Presidential Terms (000s)
Rank Term Private Public Total Non-Farm
1 Clinton 1 10,884 692 11,576
2 Clinton 2 10,082 1,242 11,312
3 Reagan 2 9,357 1,438 10,795
4 Carter 9,041 1,304 10,345
Obama 21 9,171 310 9,481
Pace2 10,005 338 10,343
144 Months into 2nd Term
2Current Pace for Obama’s 2nd Term

The last table shows the jobs needed per month for Obama’s 2nd term to be in the top four presidential terms. Right now it looks like Obama’s 2nd term will be 2nd or 3rd best for private employment, and probably 4th or 5th for total employment.

 

Average Jobs needed per month (000s)
for remainder of Obama’s 2nd Term
to Rank Private Total
#1 428 524
#2 228 461
#3 47 329
#4 -33 216

 

Read more at http://www.calculatedriskblog.com/2016/10/public-and-private-sector-payroll-jobs.html#yQoPVIsCRMmW46OV.99

by Bill McBride on 10/07/2016 02:43:00 PM

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Published at Fri, 07 Oct 2016 18:43:00 +0000

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Venezuela PDVSA says bond swap legal

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By PIRO4D from Pixabay

Venezuela PDVSA says bond swap legal


Oct 7 Venezuela’s state oil company
PDVSA said on Friday its ongoing bond swap was
“perfectly legal,” hitting back at subsidiaries of U.S. oil
company ConocoPhillips that sued it this week saying the
operation was fraudulent.

 

The Caracas-based company added in a statement that planned
operations would proceed without interference.

 

 

(Reporting by Alexandra Ulmer; Editing by Richard Chang)

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Published at Fri, 07 Oct 2016 17:12:56 +0000

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Why Japan and Europe Have Two Completely Different Plans for Their Unprofitable Banks

Why Japan and Europe Have Two Completely Different Plans for Their Unprofitable Banks

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Banks in Europe and Japan, where interest rates are negative, are increasingly unprofitable. But financial and monetary authorities are taking very different approaches, and fresh data from the IMF suggests that both may have good ideas.
Published at Thu, 06 Oct 2016 15:05:00 +0000

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