nothing can stop our Awakening.
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Submitted by Michael Every of Rabobank
Ages and Ages of Rage
Monday morning and we here we go again for another “dramatic week”. There are going to be monthly PMIs to look at in particular: will we see any further deterioration, or will growth start to pick up as an early Christmas present? And there are of course rate meetings for the Fed, and the BOJ, and the BOC: the former will cut, with the real issue being if they will signal more soon or not given they are already deep in Repo Madness; and will the giant BOJ wake up from slumber like a giant Kaiju and start throwing markets into turmoil again?
Plus there is the Brexit circus. Will the EU grant the UK an extension until end-January 2020, or a more flexible date, or will France veto that and insist on a very short extension? Almost certainly they will insist that the newly reopened Withdrawal Agreement is this time firmly shut – so if the British Parliament then decides to merrily reopen it from its end and unilaterally start ramming amendments into it, it will not be doing so with EU approval. As such, and just as pertinently, will PM BoJo get his December election or not? The greater likelihood is not, as Labour appears to be desperate for an election – just not now – although the Lib Dems may be prepared to allow one given they see this as a way to prevent any further movement towards Brexit in the short term. (Though what do they think the election campaign will be about? The price of cheese?) Note that the latest opinion poll for the Observer has the Tories on 40% (+3 on the week), Labour unchanged on 24%, and the Lib Dems on 15% (-1), with the Brexit Party on 10% (-2).
In Europe, we have just seen the AfD surge to second place in state elections in Germany’s Thuringia with 24% of the vote, double what it got last time, putting it 1ppt ahead of Chancellor Merkel’s CDU, with the Far Left Die Linke in first place. The AfD are nowhere near power as nobody will co-operate with them, but that 24% outcome is all the more remarkable given an attack on a synagogue and neo-Nazi death threats through the campaign.
In China, Chairman Xi Jinping will be presiding over the long-expected Communist Party Plenum, which is usually looked to for policy guidance. Market expectations this time are that all the focus will be on politics and control, and none will be on market-based reforms. Tellingly, this weekend saw China disband a three-year old Global Forum on Steel Excess Capacity after nobody has been prepared to cut back on capacity: China is claiming it alone has, but this somehow overlooks that its net steel output is up on three years ago, at a record high, and still growing.
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