In Brief – N.39 – October 3, 2016

China and the United States, the world’s two biggest emitters of greenhouse gases ratified the Paris agreement to cut climate-warming emissions as heads of state from the Group of 20 biggest economies, or G20, arrived for a summit in the city of Hangzhou (China).

North Korea (DPRK) fired off anew three ballistic missiles from near Hwangju on September 5, 2016 that fell within Japan’s exclusive economic zone (EEZ), a move that Tokyo called a grave threat to national security amid Pyongyang’s growing ability to strike the Japanese archipelago.

French Defense Minister Jean-Yves Le Drian warned about a “spreadingrisk of jihadists who belong to ISIS towards countries like Tunisia or Egypt once they’ve been expelled from areas they are occupying in Libya.

Tensions have been high between Germany and Turkey after Ankara has repeatedly blocked German politicians from visiting soldiers at the Turkish Incirlik airbase. But Berlin still plans to invest some EUR 58 million in that base.

“They’re keeping the rates down so that everything else doesn’t go down,” Republican presidential nominee Donald Trump said about a potential rate hike by the Fed in September 2016. “We have a very false economy. At some point the rates are going to have to change,” Trump added.

According to consultancy PwC, Paris is currently the fourth most attractive city in the world followed by Amsterdam and New York. Despite terrorist attacks and economic crisis, “Paris demonstrates that one benefit of a great city can be the resilience its systems confer,” the report said.

The Pentagon said a Russian fighter plane flew within about 10ft (3m) of one of its reconnaissance aircraft operating over the Black Sea. The intercept has been described as “dangerous and unprofessional,” and as another indication of growing tensions between the two great powers.

The Fed’s latest “Beige Bookreported a “modest” or “moderate” pace of overall economic growth across the United States. A number of contacts told the Fed they are anticipating weaker growth and attributed the situation to uncertainty and weakness in global markets.

North Korea (DPRK) conducted its second nuclear test in eight months (fifth in all) on September 9, 2016 which was assessed as powerful as 10 kilotons, raising concerns that Pyongyang has moved a step closer to its goal of a nuclear-armed missile that could one day strike the US mainland.

Catalan separatists have gathered a million people at simultaneous demonstrations in five cities, including Barcelona. Such a big crowd encouraged secessionists and proved the liveliness of a high risk political issue for both Spain and Europe.

The President of the European Commission (EC), Jean-Claude Juncker, has launched an investigation to verify the compliance of the recruitment two months ago of his predecessor, José Manuel Barroso, by the US investment bank Goldman Sachs.

The United States and Russia on September 9, 2016 agreed a plan to impose a ceasefire in the Syrian civil war and lay the foundation of a peace process. Syrian President Bashar Al-Assad is said to approve the plan while “rebels”, notably those with ties to Saudi Arabia, are said to disapprove.

Commercial oil production up from 0.5 to 1 million tons this year at the giant Kashagan field in Kazakhstan will begin in November 2016, the chief executive of state oil firm KazMunayGaz said. The total production could rise to as much as 50 million tons in the future.

Chief executives see the US economy stuck in slow-growth mode and appear to have little optimism that November’s election will spark stronger gains. “At this time of every election cycle, especially after a two-term president, there is a degree of uncertainty,” one CEO said.

Brazil said it is “very concerned about the recent multiplication of arbitrary arrests in Venezuela, taken place in default of the due process of law and in clear disregard to the fundamental freedoms and guarantees.” Venezuela was then threatened with suspension from Mercosur by founding members Argentina, Brazil, Paraguay and Uruguay.

“UK policy in Libya before and since the intervention of March 2011 was founded on erroneous assumptions and an incomplete understanding of the country and the situation,” according to a British parliamentary report that strongly criticized the UK- and France-led 2011 military intervention in Libya against late Libyan leader Muammar Gaddafi.

Israel and the US signed historic military aid package deal worth a total USD 38 billion, the largest aid package ever to be delivered by the US to its allies in history. The agreement, which will go into effect upon the expiration of the current package in 2018, will last for 10 years.

“The complex relationship between sea level rise, storm surge and global readiness and responsiveness must be explored down to the operational level, across the Services and Joint forces, and up to a strategic level as well,” according to a dozen US former senior military and national security officials who “urged robust new course on Climate Change” in three different reports.

The US Justice Department (DOJ) is seeking a USD 14 billion civil settlement with Deutsche Bank over the German financial institution’s alleged role in artificially propping up the US housing market in the lead up to the Great Recession.

The governing United Russia party of President Vladimir Putin is likely to consolidate its dominance over Russia’s lower house after a parliamentary election it won with 54.3% of the vote. However the turnout has been weaker since only 47.8% of the Russians have voted compared to 60% in the previous election of 2011.

The Bank for International Settlements (BIS) said China’s debt has reached a worrisome level at USD 22 trillion and a 30.1% credit-to-GDP gap, far above the 10% associated with banking risks, and above Greece’s for instance. This could “sow the seeds” for futures crises, the BIS warned.

EU members states have accepted Bosnia’s membership application, starting a long process to decide on its candidacy. Bosnia’s membership process is particularly complicated given the country’s governance structure.

Wells Fargo’s longtime CEO John Stumpf endured more than two hours of stiff questioning during a Senate hearing, as his attempt to apologize for a scandal involving millions of sham accounts reignited anger over whether the big banks are being held accountable for their misdeeds.

ISIS militants on September 20, 2016 fired a shell that may have contained a mustard agent onto a military base in northern Iraq used by US and Iraqi troops, CNN reported, citing several US officials who emphasized that mustard agent is relatively easy to produce.

The former European commissioner Neelie Kroes, who is now a paid adviser to Bank of America and Uber, failed to declare her directorship of an offshore firm in the Bahamas while she was the most powerful corporate enforcer in Brussels (2000-2009). Her firm’s partner would be a Jordanian with very close ties to UAE Crown Prince.

The former head of the IMF (2004-2007) and Spain’s Minister of Economy for the right-wing People’s Party from 1996 to 2004, Rodrigo Rato, is being tried along with 65 others on corruption charges stemming from his tenure atop Spanish bank Caja Madrid which became Bankia in 2010.

“The authorities’ current targets remain unrealistic. (…) It cannot be assumed that Greece can simply grow out of its debt problem. Further debt relief will be required to restore sustainability,” warned the IMF.

World trade will grow more slowly than expected in 2016, expanding by just 1.7%, well below the April forecast of 2.8%, according to the WTO estimates. The forecast for 2017 has also been revised, with trade now expected to grow between 1.8% and 3.1%, down from 3.6% previously. With expected global GDP growth of 2.2% in 2016, this year would mark the slowest pace of trade and output growth since the financial crisis of 2009.

Sales of new homes in the United States retreated in August 2016, one month after surging to the highest level in nearly nine years. Activity fell in all regions of the country except the West. This may be one more negative news on the macroeconomic front.

China’s high-speed railways now exceed 20,000 km in length with the opening of a line linking Zhengzhou in central China’s Henan Province with Xuzhou in eastern Jiangsu Province.

India has accused Pakistan-based militants of an attack that killed 18 soldiers in Kashmir this September 2016. That’s why India has pulled out of a key Saarc regional summit in Pakistan because of what it has called “increasing cross-border terrorist attacks in the region.”

In a surprise announcement, the Algiers Conference opted for an OPEC-14 production target ranging between 32.5 and 33.0 mb/d (around minus 700,000 barrels per day, 1/3 of the output surplus), in order to accelerate the ongoing drawdown of the oil stock overhang and bring the rebalancing forward.

Philippine President Rodrigo Duterte announced he is giving notice to the United States with whom he said relations have reached “a point of no return,” that joint exercises of Filipino and American troops will be terminated soon. Duterte said he wants establish new trade and commercial alliances with China and Russia.

The Senate voted overwhelmingly to override President Obama’s veto of a bill that would allow the families of 9/11 victims to sue Saudi Arabia. The 97-1 vote marks the first time the Senate has mustered enough support to overrule Obama’s veto pen.