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David Fuller and Eoin Treacy's Comment of the Day
Category - Global Middle Class

    Anti-Corruption Crusader Is Eyeing Brazil Presidential Bid, Sources Say

    This article by Simone Preissler Iglesias and Samy Adghirni for Bloomberg may be of interest to subscribers. Here is a section:

    Barbosa, a 63 year-old black man raised in poverty, became a household name in Brazil during the Supreme Court’s handling of the so-called "mensalao" corruption scandal in the government of President Luiz Inacio Lula da Silva. Of all the potential candidates for October’s presidential elections, Barbosa has one of the lowest rejection ratings, at just 14 percent, according to Datafolha polling company. That compares with 60 percent for President Michel Temer and 40 percent for Lula.

    The former judge is a presidential candidate "with potentially the best profile in the field," according to a note published by Eurasia Group on March 29, adding that he has a good mix of experience, anti-corruption credentials, and credibility on social issues.

    "It’s a huge movement on the electoral chess board," said Richard Back, a political analyst at XP Investimentos.

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    As Trump Takes On China, Another Trade Challenge Looms in Asia

    This article by Connor Cislo and Jiyeun Lee for Bloomberg may be of interest to subscribers. Here is a section:

    But at the same time, there’s been a spike in sales to China of precision metal working machines and equipment for making chips from firms like Japan’s Yaskawa Electric Corp. With a Chinese state-backed fund gearing up to pour as much as $31.5 billion into homegrown semiconductor manufacturing, there’s potential for trade flows to start to shift.

    China’s ambitions, set out in its sweeping Made in China 2025 plan, go much further than semiconductors and would see its technical prowess advance in a host of areas, ranging from bio- medicine and artificial intelligence to new-energy vehicles and aircraft. The challenge to Japan, Korea and Taiwan also applies to European exporters like Germany, and comes on top of the risks to global trade from the Trump administration’s embrace of tariffs.

    "The bits of the global supply chain that are currently the preserve of Korea, Japan, Taiwan, the U.S., and Germany, are the bits of the supply chain that China has a decade-long industrial strategy to move into," said Tom Orlik, Bloomberg’s chief Asia economist. He said it’s only a matter of time before many components for electronic products are made domestically and the country is on track to become a car exporter. Eventually, it will be selling airplanes, said Orlik.

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    Protectionism Risks? What's Next?

    Thanks to a subscriber for this report from Morgan Stanley which may be of interest to subscribers. Here is a section:

    Pimco Sells Australia Banks, Property Bonds as Risks Climb

    This article by Ruth Carson and Andreea Papuc for Bloomberg market be of interest to subscribers. Here is a section:

    Risk assets are vulnerable to a correction as valuations approach fair value, Thakur and John Dwyer, vice president and credit research analyst, wrote in a report.

    “This risk becomes more important as we transition to a period of gradual tightening of monetary policy by global central banks,” according to the report. Asset prices offer little buffer to the risk of possible shocks resulting from negative growth surprises or higher-than-expected inflation, they said.

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    Persimmon chief's 75m pound bonus 'almost unfathomable'

    This article by Rob Davies for The Guardian may be of interest to subscribers. Here is a section:

    In an evidence session held by the housing committee on Monday, the Labour MP Helen Hayes asked Raab if he was comfortable with the “positive effect” that help to buy had had on housebuilders’ profits and executive bonuses. “It’s almost unfathomable,” said Raab. “No I’m not comfortable with it.

    “That’s why the government has introduced measures on corporate governance and is encouraging shareholders to take a greater grip on it. We want to see shareholders take a stronger grip on it and we’re starting to see more shareholder activism.”

    Hayes asked if the government was monitoring the effect that help to buy was having on corporate profits. “I’m not sure how we would measure a hydraulic relationship between those three points,” Raab said. He added that “other parts of government” were looking at corporate pay.

    Help to buy is designed to spur the construction of new homes by giving aspiring homeowners an interest-free government loan worth up to 20% of a property’s value – if the buyer opts for new build. According to several reports, housebuilders have simply increased the price of homes in response, driving up prices and boosting their own profits.

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    How a Donald Trump-Kim Jong Un Summit Scrambles the Calculus for Key Players

    This article by Jonathan Cheng in Seoul and Alastair Gale for the Wall Street Journal may be of interest to subscribers. Here is a section:

    President Donald Trump’s decision to accept a meeting with North Korean leader Kim Jong Un caught the world off guard.

    In agreeing to sit down with North Korea’s third-generation leader, Mr. Trump has boosted the stature of Mr. Kim—a man he has ridiculed as “Little Rocket Man” and threatened with “fire and fury”—with a surprise diplomatic opening that left some allies wrong-footed.

    For Mr. Kim, who is half the age of Mr. Trump, just getting a summit meeting with the U.S. president is a big win. Neither his father nor his grandfather succeeded in getting a face-to-face meeting with a sitting U.S. president.

    Mr. Trump’s move represents a victory for South Korea’s president, Moon Jae-in, who has pleaded with the U.S. to tone down its rhetoric and worked assiduously to get negotiations off the ground, and others who have pushed for engagement and diplomacy.

    Other U.S. allies and some veteran negotiators, however, expressed concern that while a summit meeting could lead to a breakthrough in what has been a protracted standoff, it is a risky move that could lead to ill-considered concessions to Pyongyang.

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    Email of the day on lead indicators

    Brazil Seen as More Corrupt Than Argentina in Global Ranking

    This article by David Biller and Charlie Devereux for Bloomberg may be of interest to subscribers. Here is a section: 

    Brazil is now seen as more corrupt than Argentina for the first time in over two decades after suffering last year one of the biggest plunges among the nations tracked by a global transparency ranking.

    Latin America’s largest economy fell 17 positions in the2017 index released by graft watchdog Transparency International on Thursday. It now ranks 96th among 180 nations, tied in the region with Colombia and Peru. Only two other countries in the whole index -- Bahrain and Liberia -- slid more than Brazil last year. Argentina meantime rose 10 spots, to 85th place and now ranks better than Brazil for the first time since 1996.

    A series of corruption scandals have rocked Brazil over the past few years as the so-called Carwash probe uncovered a massive kickback scheme involving the country’s political and business elite. Former President Luiz Inacio Lula da Silva was convicted for graft last year while allegations against President Michel Temer are still being investigated. In Argentina, meanwhile, President Mauricio Macri has worked to make public tenders more transparent and successfully pushed for a law allowing plea bargain testimonies to resolve corruption cases.

    Among key Latin American countries, the least transparent are still Venezuela (169th position) and Mexico (135th spot).

    Transparency International’s ranking is based on surveys and assessments from 12 institutions and has become a benchmark gauge of corruption perception used by analysts and investors.

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    Email of the day on the potential for downtrends

    Your recent assessments of the markets appear to be that a period of ranging is likely to be followed by markets going up again. Of course, whilst no one knows what the future will be, I wonder why you don't see the greater likelihood of markets turning down after some consolidation. With the amount of US debt increasing, interest rates increasing, and stock market levels already high by historical standards, are you not more concerned that markets, being forwards looking, might be more likely to head down than up? Esp. since markets struggle when interest rates go above 3%? I appreciate your talk of share rotation, but a rising tide lifts all boats and surely the opposite is true when markets tank?

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