Macro Links Jan 12th – “Shithole Countries”
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MACRO LINKS TABLE OF CONTENTS (Click or Scroll Down)
- “SHITHOLE COUNTRIES”
- FACEBOOK OVERHAUL
- BITCOIN, CRYPTOCURRENCY, INITIAL COIN OFFERINGS
- TAXATION, WEALTH HAVENS, INEQUALITY
- RUSSIA PROBE
- NORTH / SOUTH KOREA, IRAN, NUCLEAR WEAPONS
- RATES, LIQUIDITY, SYSTEMIC RISK, BALANCE SHEETS
- MACRO OP-EDS, INSIGHT, EVENTS AND TRENDS
- CENTRAL BANKS & MONETARY POLICY
- USA ECONOMY DATA, CITIES AND STATES
- GLOBAL ECONOMY DATA
- DEALS, MERGERS, IPOs, LBOs, RESTRUCTURINGS
- REAL ESTATE, HOUSING, REITS, COMMERCIAL
- HEDGE FUNDS, PRIVATE EQUITY, MONEY MGMT
- POLLUTION, CLIMATE & ENVIRONMENT
- BREXIT, SCOXIT, LONDON, UK ECONOMY
- DACA, TRAVEL BAN, IMMIGRATION, WALL
- GEOPOLITICS, CRIME, TERRORISM
- PRIVACY, HACKING, CYBERWAR, SURVEILLANCE STATE
- TRUMP WORLD
- TRADE, PROTECTIONISM, REGULATION, OVERSIGHT
- SILICON VALLEY, UNICORNS, STARTUPS, VC
- AUTOS, ELECTRIC, SELF-DRIVING
- AEROSPACE, MILITARY & DEFENSE
“Why are we having all these people from shithole countries come here?” Trump said, according to these people, referring to countries mentioned by the lawmakers.
Trump then suggested that the United States should instead bring more people from countries such as Norway, whose prime minister he met with Wednesday. The president, according to a White House official, also suggested he would be open to more immigrants from Asian countries because he felt they help the United States economically.
The White House didn’t dispute the quotations. Asked about the account, White House spokesman Raj Shah said “certain Washington politicians choose to fight for foreign countries, but President Trump will always fight for the American people.”
It is exceedingly rare for the country’s biggest news organizations to publish a quote that includes an expletive; usually, they employ a censored or blanked-out version. On Thursday’s network evening newscasts, NBC News was the only organization that quoted Mr. Trump in full. Anchors at ABC and CBS used the word “blank” instead.
But several media executives said on Thursday that the news value of Mr. Trump’s remarks, which the White House did not dispute, was undeniable. “It would be futile to mask the word when the language itself, in reference to Haiti and African countries, was so extraordinary,” said The A.P.’s vice president for standards, John Daniszewski.
The comments were reminiscent of ones the president made last year in an Oval Office meeting with cabinet officials and administration aides, during which he complained about admitting Haitians to the country, saying that they all had AIDS, as well as Nigerians, who he said would never go back to their “huts,” according to officials who heard the statements in person or were briefed on the remarks by people who had. The White House vehemently denied last month that Mr. Trump made those remarks.
One witness to Trump’s comments said “it was in more general terms than Haiti or Africa. At least it was in context. Sometimes he goes off on things. And he’s very disjointed. In this case, he doesn’t know what TPS [Temporary Protected Status] is. He didn’t realize these people are already here. … He says things that are offensive all the time. It’s like he doesn’t know.”
Three weeks ago, the New York Times reported that President Trump had said something hugely offensive about Haitians – that they “all have AIDS” – in a June meeting about immigration. The White House strenuously denied it, and the fact that the story landed on Dec. 23 helped it escape scandal proportions. Trump won’t be so fortunate with his latest comments on Haiti.
President Trump appears to have a habit of making offensive comments about nonwhite immigrants. And while many of his surrogates argue that the president is not against this particular population, there is a trail of comments that tell a different story.
Facebook has introduced sweeping changes to the kinds of posts, videos and photos that its more than two billion members will see most often, saying on Thursday that it would prioritize what their friends and family share and comment on while de-emphasizing content from publishers and brands.
The shift is the most significant overhaul in years to Facebook’s News Feed, the cascading screen of content that people see when they log into the social network. Over the next few weeks, users will begin seeing fewer viral videos and news articles shared by media companies. Instead, Facebook will highlight posts that friends have interacted with — for example, a photo of your dog or a status update that many of them have commented on or liked.
The changes are intended to maximize the amount of content with “meaningful interaction” that people consume on Facebook, Mark Zuckerberg, the company’s chief executive, said in an interview. Facebook, he said, had closely studied what kinds of posts had stressed or harmed users. The social network wants to reduce what Mr. Zuckerberg called “passive content” — videos and articles that ask little more of the viewer than to sit back and watch or read — so that users’ time on the site was well spent.
“We want to make sure that our products are not just fun, but are good for people,” Mr. Zuckerberg said. “We need to refocus the system.”
Mr Zuckerberg said users would see less public content “like posts from businesses, brands and media”. This content would be prioritised based on whether it encouraged interactions between people, rather than “passively read”.
The Facebook chief executive warned that time spent on the social network — a metric watched by investors — and some other measurements will go down. US users have been spending about 50 minutes a day in Facebook-owned apps, giving the network ample opportunities to show them advertising.
“By making these changes, I expect the time people spend on Facebook and some measures of engagement will go down,” Zuckerberg wrote. “But I also expect the time you do spend on Facebook will be more valuable. And if we do the right thing, I believe that will be good for our community and our business over the long term too.”
BITCOIN, CRYPTOCURRENCY, INITIAL COIN OFFERINGS
A top official from South Korea said the government is preparing a bill to ban the trading of cryptocurrencies on exchanges, stepping up its efforts to curb speculation.
The remarks from Minister of Justice Park Sang-ki came just days after the country’s financial regulator started inspecting some of South Korea’s largest financial institutions that help facilitate digital-currency trading. Bitcoin prices tumbled as much as 13.7% Thursday, falling more sharply on Korean exchanges than other trading venues.
Among the blows to cryptocurrencies this week was the South Korean justice minister’s reiteration of a proposal to ban local cryptocurrency exchanges, though the comments were later downplayed by a spokesman for the president. Meanwhile, bitcoin mining — the process needed to facilitate transactions — is set to become more expensive as China’s government cracks down on the industry, in part out of concerns about power use.
In the U.S., scrutiny is set to increase amid concerns about the potential use of cryptocurrencies for fraudulent purposes such as money laundering. Securities and Exchange Commission Chairman Jay Clayton and Commodity Futures Trading Commission Chairman J. Christopher Giancarlo are set to testify to the Senate Banking Committee on risks tied to bitcoin and its counterparts, according to a person with direct knowledge of the matter. The committee intends to hold a hearing in early February, the person said.
TAXATION, WEALTH HAVENS, INEQUALITY
U.S. airlines are among the biggest beneficiaries of the tax plan. They also may be at the greatest danger of competing their tax gains away. Because nearly all of airlines’ income is taxed domestically, the cutting of the corporate rate to 21% will reduce their tax bill markedly more than multinationals that have been paying lower-than-U.S. tax rates on their foreign operations. Delta Air Lines, for example, has had an effective tax rate of about 35%, while Apple’s has been about 25%.
The tax-plan provision allowing companies to immediately write down the full value of capital investments provides carriers with another big benefit—especially for those such as JetBlue that have been spending heavily on aircraft purchases. Another tax-plan benefit: The additional money it is putting in the pockets of taxpayers and corporations should boost demand for air travel.
So airline investors should be pretty happy about the tax plan. The one catch is that airlines have a history of frittering away any extra money that comes their way. While the industry has been more disciplined in recent years, it isn’t clear that it has fully weaned itself of the habit of adding too many planes and dropping prices to lure travelers away from competitors whenever the opportunity arises.
Stemming from a Republican overhaul of international business taxes, the loophole involves the tax rates – 15.5 percent or 8 percent – that companies must pay on $2.6 trillion in profits they are holding abroad.
By manipulating their foreign cash positions, a determining factor under the new law, a U.S. multinational could potentially save money by shifting profits to the lower rate from the higher one, according to Stephen Shay, a senior lecturer at Harvard Law School.
The savings could amount to more than $4 billion in Apple’s case alone, he said. An Apple spokesman declined to speak on the record about Shay’s analysis. U.S. Treasury Department and Internal Revenue Service officials did not respond to Reuters’ queries seeking comment.
“This is the FBI we’re talking about—that is treason,” the president said. “That is a treasonous act. What he tweeted to his lover is a treasonous act.”
Aitan Goelman, an attorney for Mr. Strzok, said: “It is beyond reckless for the president of the United States to accuse Pete Strzok, a man who has devoted his entire adult life to defending this country, of treason. It should surprise no one that the president has both the facts and the law wrong.”
Corey Lewandowski is scheduled to take questions next week from congressional investigators looking into possible collusion between the Trump campaign and the Kremlin, The Daily Beast has learned. Lewandowski is one of several witnesses the House intelligence committee plans to interview as part of its Trump-Russia investigation. Reached for comment, Lewandowski indicated he will take questions, rather than pleading the fifth as other witnesses have done. “I’ll sit with anyone anytime,” Lewandowski told The Daily Beast. “I didn’t collude, coordinate, or cooperate with any foreign people or governments.”
It is not unheard of for one attorney to represent more than one client on the same matter. But the fact that several key players with Trump administration ties have the same lawyer could irk investigators.
“In general, prosecutors don’t like it when the same attorney represents multiple people who are subjects—or more—because it looks like they’re controlling the story,” said Ken White, a former federal prosecutor who specializes in First Amendment issues, speaking of investigators’ targets.
NORTH / SOUTH KOREA, IRAN, NUCLEAR WEAPONS
President Donald Trump said he “probably” has “a very good relationship” with Kim Jong Un but would not say whether he has spoken to the North Korean leader during an interview with The Wall Street Journal Thursday.
“I probably have a very good relationship with Kim Jong Un, ” Trump told the Journal in a 45-minute sit-down at the White House. “I have relationships with people. I think you people are surprised.”
The president, who in recent weeks has alternated between trading taunts with Kim and expressing optimism for diplomacy with North Korea, would not specify whether he’s spoken directly to Kim.
”I don’t want to comment on it. I’m not saying I have or haven’t. I just don’t want to comment,” Trump said.
Mr. Trump’s remarks on North Korea, with which the U.S. has no formal diplomatic relations, came in a wide-ranging, 45-minute interview in the Oval Office about the first year of his presidency. As with North Korea, Mr. Trump offered some optimistic words about his efforts to remake the North American Free Trade Agreement with Mexico and Canada.
Not long ago, Ma Xiaohong was the public face of China’s trade with North Korea. By age 44, she had built a commercial empire accounting for a fifth of trade between the Communist neighbors. She was appointed to the provincial People’s Congress, granted special privileges to export petroleum products to the North and feted by officials as a “woman of distinction.”
Now, Ms. Ma’s fate has become a test of China’s willingness to support President Trump’s efforts to throttle North Korea’s nuclear ambitions.
“I believe Mr. Kim Jong Un has certainly won this round,” Putin said, according to Russian state news outlet RT.
“He has a nuclear [charge] and a…missile with a range of up to 13,000 kilometers that can reach almost any place on Earth, or at least any territory of his potential adversary,” he added.
Three of Washington’s closest European allies urged the Trump administration not to abandon the Iranian nuclear deal, with U.K. Foreign Secretary Boris Johnson saying opponents of the agreement have shown no better alternative to stop Iran developing its nuclear program.
Speaking ahead of an expected announcement from the Trump administration this week on whether it will keep sanctions on Iran suspended in line with the 2015 deal, French Foreign Minister Jean-Yves Le Drian on Thursday appealed to U.S. allies to “scrupulously abide by” its commitments.
President Trump has again stopped short of reimposing draconian sanctions on Iran that could break up its nuclear deal with world powers, two people briefed on his decision said on Thursday, but he is expected to give Congress and European allies a deadline to improve the deal or the United States will pull out of it.
He also approved targeted sanctions against several Iranian government officials for corruption and human rights abuses, some of it related to the antigovernment protests that have convulsed Iranian cities this month, these people said.
The collapse of investment firms offering outlandish returns fueled the protests that grew into the biggest challenge to the regime since 2009. Iranians blame the firms for pocketing funds and the government for not adequately regulating the industry.
RATES, LIQUIDITY, SYSTEMIC RISK, BALANCE SHEETS
Emerging market debt funds saw record net inflows of $68.9bn last year, smashing the previous record of $39bn in 2012, according to figures from Morgan Stanley and EPFR. No let up is on the horizon: even in the holiday-riddled week to January 3, a further $1.8bn was pumped into EM bond funds.
Several metrics of market valuation are indeed flashing red. Equities have added to last year’s 20 per cent gains and already broken records. The recent interest in bitcoin is reminiscent of the kind of investor mania that often precedes a financial crisis. The cyclically adjusted price/earnings ratio currently exceeds the peak seen on the eve of the stock market crash of 1929 and is approaching the all-time high seen during the tech bubble in 2000. Even accounting for low interest rates, stocks are relatively expensive.
Credit valuations are similarly high despite a flood of issuance. High-yield and investment-grade volumes reached record levels in 2017. Default rates are still declining, but the rate has slowed and the credit risk premium is at cyclical lows.
Moreover, there appears to be a growing problem with the plumbing of the financial system. In the $1tn leveraged loans market, 75 per cent of new issuance is defined as covenant-lite, a sure sign investors are reaching for yield.
China’s foreign-exchange regulator has denied that the country intends to slow or halt purchases of US government debt following a report that helped propel the benchmark 10-year Treasury yield to a nine-month high this week.
Bloomberg reported on Wednesday that senior, unnamed Chinese officials had recommended slowing or halting purchases of Treasuries, which deepened a sell-off in the world’s largest government debt market as investors anticipate tighter Federal Reserve policy this year.
U.S. producer prices fell in December for the first time in more than a year, a sign inflation pressures remain modest even though the economy appeared to pick up steam last year.
The producer-price index, a measure of the prices businesses fetched for their goods and services, fell 0.1% in December from a month earlier, the Labor Department said Thursday. That marked the first decline since August 2016.
By some estimates, China’s real growth rate, accounting for bad debt, is roughly half the official one of about 6.9 percent. To gauge whether China has been creating good debt—debt that will produce positive returns—or bad, we’ve examined who the beneficiaries of corporate lending are.
As shown in the left-hand figure above, profits at private-sector enterprises rose 18 percent between 2011 and 2016, while profits at state-owned enterprises (SOEs) plunged by 33 percent. As shown in the right-hand figure, however, the share of corporate liability growth accounted for by SOEs soared from 59 percent in 2010 to 80 percent by 2016. This is the opposite of what one would expect in a market economy.
Standard & Poor’s downgraded Brazil’s credit rating deeper into junk territory on Thursday, citing the government’s failure to pass key fiscal reforms.
The move by the rating agency is a slap in the face for the administration of President Michel Temer, which has been touting Brazil’s progress in recovering from its worst recession on record. The stock market has also been hitting new records.
MACRO OP-EDS, INSIGHT, EVENTS AND TRENDS
The hype around bitcoin, and its underpinning blockchain technology, is real. But we are still a ways off from blockchain reaching full maturity.
Blockchain, which is best explained as a decentralized ledger, is best known for being the technology behind red-hot bitcoin. But its potential use-cases do not just reside in the world for digital currencies or financial services, according to a wide-ranging report by Credit Suisse, the Switzerland-based bank.
According to the bank, a survey conducted by the World Economic Forum found 58% of executives anticipate 10% of global GDP to “be stored on the blockchain before 2025.”
That’s the year Credit Suisse expects the technology to reach full maturity. At the moment, the technology is in the middle of the prototype and pilot stage. Market watchers can expect 2018 to be a year in which “certain products go viral” and “new providers/models emerge,” according to the bank. Here’s a chart illustrating blockchain’s development timeline:
“It’s going to be a nightmare for people who are worried about doing the right thing,” said Andrew Schaefer, a federally licensed tax expert in Florida who represents taxpayers before the Internal Revenue Service. At stake this year could be tens of billions in profit and perhaps more, Schaefer said, judging by the surge of interest in bitcoin. Some of that could be subject to federal and state taxes based on how many people sold their assets.
“2016 saw some questions come up,” said Lisa Greene-Lewis, a lead certified public accountant at TurboTax. “As people are doing their taxes [this year], we may see more because more people have been trading and selling.”
The most recent IRS guidance on the matter is from 2014, when it said taxpayers should treat their virtual currency like property. Under that rule, taxpayers must declare any profit, also known as capital gains, or losses they take when they sell bitcoin at a different price than when they bought it. The same policy applies to purchases of real-world goods. For example, suppose you tried to buy a cup of coffee with bitcoin. That would technically count as a sale of your bitcoin. You might owe capital gains tax if the bitcoin you paid at the cash register had increased in value from the time you first acquired it. The IRS declined to comment for this story, referring back to that 2014 guidance.
Five years ago, fixed-income trading — so called because its keystone product, bonds, typically provides a fixed payout — generated nearly $103 billion in income for the top 12 investment banks, according to Coalition, a London research firm.
By 2016, that had fallen to less than $76 billion — down $27 billion from the peak.
The accelerating losses are likely to be on display over the next week as the biggest United States banks report their annual results, starting with JPMorgan Chase on Friday. Some analysts predict that fixed-income revenue could fall another 20 percent this year. Some large banks, including Deutsche Bank, have already warned that the bond-trading blood bath will get worse.
CENTRAL BANKS & MONETARY POLICY
The European Central Bank has indicated it is preparing to cut its crisis-era stimulus programme faster than anticipated, joining monetary policymakers in most developed economies in expressing increased confidence in the global economic recovery.
The signal, contained in minutes of the ECB’s December rate-setting meeting published on Thursday, came just days after the Bank of Japan sent a similar message by disclosing it had purchased fewer bonds than investors had expected as part of its quantitative easing efforts.
US tax cuts pushed through last month added to the risk that the economy could overheat, hardening the case for higher short-term interest rates, a top Federal Reserve official said.
Bill Dudley, the New York Fed president, said that at a time when the US was in a period of above-trend growth with unemployment heading below 4 per cent, tax reductions would deliver an “extra boost” to the economy in both 2018 and 2019.
USA ECONOMY DATA, CITIES AND STATES
The world’s largest retailer and private employer, officially called Wal-Mart Stores Inc, will shutter 63 of its Sam’s Club discount warehouses, or about one tenth of the chain overall, according to a senior company official who declined to be named.
Around 50 of those stores will be shut permanently after a review of profitability and up to 12 more will be shut and reopened as e-commerce warehouses, the person said.
Walmart is raising its US starting wage from $9 to $11 an hour, in the latest sign that corporate America is seeking to share the windfall from the Republicans’ sweeping tax reform plan.
Walmart is the world’s largest retailer and the largest private employer in the US, providing a source of income for 1.5m Americans. The 56-year-old company for years has come under fire over how it treats employees and the move could help mend its image after rival Target last year raised its starting wage to $11 an hour.
GLOBAL ECONOMY DATA
China reported its largest-ever annual trade surplus with the U.S. last year while its overall imbalance with the world shrank, potentially strengthening the Trump administration’s case for tougher penalties and other trade actions against Beijing.
The widening of the China-U.S. trade imbalance comes as U.S. and Chinese officials and business groups warn of sharper clashes over trade between the world’s largest economies.
“The risks of growing U.S.-China trade conflicts are high,” said Zhang Ming, a senior economist at the Chinese Academy of Social Sciences, a government think-tank in Beijing.
Consumer prices surged 3.1% in December from the previous month, pushing the annual inflation rate to 24.8%, far beyond the central bank’s target of 17%.
Last month, officials relaxed the inflation targets for the next two years, acknowledging they have been unable to combine stronger economic growth of about 3% last year with a significant decline in the inflation rate. The problem has been compounded by a decision to raise public-utility rates to help cut billions of dollars in budget-busting subsidies.
DEALS, MERGERS, IPOs, LBOs, RESTRUCTURINGS
If Dropbox — last valued by private-market investors at about $10 billion — follows through on an initial public offering, it will become one of the highest-profile technology companies of late to seek a stock market listing. The company is on track to join Spotify, the online streaming giant, on the public markets, with Uber, Lyft and Airbnb expected to follow suit in the next few years.
Dropbox’s filing has implications for other Silicon Valley unicorns, which are companies that were privately valued at more than $1 billion. Last year, several much buzzed-about tech companies, including Snapchat’s parent company and Blue Apron, the meal kit delivery service, went public — and then promptly disappointed investors, raising questions about the durability of these businesses.
If Dropbox achieves anything like the $10bn valuation it was accorded in its last private round, it would be the most valuable US tech IPO since Snap, parent of mobile app Snapchat, early last year. This year has already brought news of a planned stock market debut by streaming music service Spotify, which was valued at $8.5bn the last time it raised money privately.
REAL ESTATE, HOUSING, REITS, COMMERCIAL
Apartment rents in Manhattan fell the most in almost four years as landlords made deeper price cuts to lure tenants in a market brimming with choices.
Landlords agreed to accept a median rent of $3,295 last month, or 2.7 percent less than the previous December, appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate said in a report Thursday. It was the biggest annual decline since February 2014, and only the second one last year.
Maureen Donnell sits on the shaded terrace of her Palm Beach estate, where a sweeping lawn meets her private dock on the Intracoastal Waterway. Swathed in a high-necked purple blouse with gold bracelets jangling at her wrists, Ms. Donnell points out a row of antique French statues depicting the four seasons by the swimming pool. A housekeeper in a crisp blue and white uniform appears bearing iced tea and cookies.
Just a mile to the north, it is far less peaceful. Here, police cars with flashing lights encircle the Mar-a-Lago Club, where President Donald Trump is spending the holidays. Nearby, Trump supporters hold signs saying “Proud Deplorable” and “Welcome First Family.”
HEDGE FUNDS, PRIVATE EQUITY, MONEY MGMT
Hedgie Bill Ackman on Wednesday ripped a page from a discount retailer’s playbook — he put his product on sale.
Ackman’s Pershing Square fund — after posting losses in each of the past three years — said it would slash its 1.5 percent annual management fee.
The discount for existing clients amounts to about 15 percent, sources said. The move will cost Pershing about $32 million over the next two years, Ackman said in a letter sent to investors.
The alleged theft of exchange-traded funds worth $1.4 billion has raised an unusual question for the industry: Who owns an ETF anyway?
The biggest of the disputed ETFs is a fund that invests in cybersecurity stocks. Best known by its ticker HACK, the fund was launched days before the 2014 breach of Sony Pictures Entertainment, and the publicity helped the fund raise $1 billion in just seven months. Andrew Chanin, the then 30-year-old co-founder and chief executive of PureFunds, was lauded as the whiz kid behind HACK’s success.
Last summer, according to two lawsuits, his PureFunds ETFs were stolen.
“The fund was so successful, and so many people watched its ascent,” said Christian Magoon, an ETF industry veteran who shared in HACK’s profits before it wound up in court. “Now it’s like a car accident, and you can’t look away.”
POLLUTION, CLIMATE & ENVIRONMENT
It’s the height of summer in Cape Town, and the southwesternmost region of South Africa is gripped by a catastrophic water shortage. Unless the city adopts widespread rationing, the government says, the taps “will be turned off” on April 22, 2018, because there will be no more water to deliver.
This would make Cape Town the first major city in the world to run out of water, according to Anthony Turton, a professor at the Centre for Environmental Management at the University of the Free State in South Africa, who spoke to the New York Times. “It’s not an impending crisis—we’re deep, deep, deep in crisis.” The shortage is the result of a multi-year drought.
Drastic measures to cut pollution in the areas around Beijing during the final months of 2017 have led to unusually clear air in the capital, offsetting the effect of a nationwide economic recovery, according to new data.
Authorities closed factories and forbade residents in provinces neighbouring Beijing from using coal to heat their homes during winter in a last-ditch effort to meet emissions-cutting targets for 2017.
Ever since China announced last year that it no longer wanted to be the “world’s garbage dump,” recycling about half of the globe’s plastics and paper products, Western nations have been puzzling over what to do when the ban went into effect, which it did on Jan. 1.
The answer, to date, in Britain at least, is nothing. At least one waste disposal site in London is already seeing a buildup of plastic recyclables and has had to pay to have some of it removed.
Similar backups have been reported in Canada, Ireland, Germany and several other European nations, while tons of rubbish is piling up in port cities like Hong Kong. Steve Frank, of Pioneer Recycling in Oregon, owns two plants that collect and sort 220,000 tons of recyclable materials each year. A majority of it was until recently exported to China. “My inventory is out of control,” he said.
Officials raised the number of people being investigated as missing to 43 and ordered some residents in the Montecito area out of their homes to ease movement for crews, reflecting the treacherous rescue effort here after deadly mudslides in California.
BREXIT, SCOXIT, LONDON, UK ECONOMY
“Maybe, just maybe, I’m reaching the point of thinking we should have a second referendum on E.U. membership,” Mr. Farage said on a British television show Thursday.
Nigel Farage has backed the prospect of a second referendum on Britain’s European Union membership, claiming it would kill off the issue “for a generation.” The former U.K. Independence Party leader predicted the percentage of British people who would vote to leave the bloc would be “very much bigger than it was last time round.”
DACA, TRAVEL BAN, IMMIGRATION, WALL
The Trump administration rejected a bipartisan Senate proposal to protect young undocumented immigrants from deportation, saying it needed more work. “We’re pleased that bipartisan members are talking,” President Donald Trump’s congressional liaison Marc Short said Thursday, but added, “I think there’s still a ways to go.”
A bipartisan group of six senators has reached a deal that would shield Dreamers from deportation and make other changes to immigration laws and border security — but the framework has yet to win over the White House and other key players on Capitol Hill.
The package negotiated by the senators includes $2.7 billion for border security, which includes Trump’s $1.6 billion request for wall planning and construction, as well as $1.1 billion for security infrastructure and technology, three sources directly familiar with the negotiations confirmed to POLITICO.
GEOPOLITICS, CRIME, TERRORISM
A Belgian official’s decision to expel several Sudanese migrants late last year — several of whom say they were tortured when they went back home — has roiled Belgium’s politics, reflecting not only the fraught migration debate in Western Europe but also the divisions that have made the country notoriously difficult to govern.
The United Nations expressed alarm on Thursday about a surge of fighting and destruction in the Idlib Province of northwestern Syria, the last major area of the country held by insurgents, where assaults by Russian-backed Syrian forces have put tens of thousands of civilians at risk.
United Nations relief officials also called on Thursday for an urgent humanitarian pause in fighting around Eastern Ghouta, the rebel-held Damascus suburb where roughly 400,000 civilians have long been trapped without access to emergency aid.
Three brothers from this dusty Gaza border town paid smugglers to spirit them through underground tunnels across the border into Egypt. There they joined the Sinai affiliate of the Islamic State, which is battling the Egyptian Army in the Sinai Desert.
One brother was killed about 18 months ago, at the age of 20. Last week the eldest, Hamza al-Zamli, 25, showed up in a shocking video, railing against Hamas, the Islamic group that dominates Gaza, and describing its fighters as “apostates.”
Pakistan has stopped sharing key intelligence with the US in the first sign that Washington’s decision to suspend military aid to Islamabad could hamper its war effort in Afghanistan.
The country was no longer handing over information collected from sources on the ground in the border region with Afghanistan, Pakistani officials told the Financial Times, leaving the US reliant on air surveillance and intercepted communications.
The American military bombed members of an Afghan government militia who were on the front lines of the battle against the Islamic State in eastern Afghanistan, killing at least 13 fighters after at least one opened fire on American Special Forces soldiers deployed there, Afghan officials said Thursday.
While some Afghan officials said that at least two American soldiers were killed in what was described as an insider attack by friendly forces, Capt. Tom Gresback, a spokesman for the United States military in Afghanistan, rejected those reports and said that only one American service member had been wounded.
PRIVACY, HACKING, CYBERWAR, SURVEILLANCE STATE
The House of Representatives voted on Thursday to extend the National Security Agency’s warrantless surveillance program for six years with minimal changes, rejecting a push by a bipartisan group of lawmakers to impose significant privacy limits when it sweeps up Americans’ emails and other personal communications.
The vote, 256 to 164, centered on an expiring law that permits the government, without a warrant, to collect communications from United States companies like Google and AT&T of foreigners abroad — even when those targets are talking to Americans. Congress had enacted the law in 2008 to legalize a form of a once-secret warrantless surveillance program created after the terrorist attacks on Sept. 11, 2001.
The glitch underscores the complexity of Intel’s challenge as it scrambles to fix the unprecedented vulnerabilities, which were disclosed more than a week ago.
In a confidential document shared with some customers Wednesday and reviewed by The Wall Street Journal, Intel said it identified three issues in updates released over the past week for “microcode,” or firmware—software that is installed directly on the processor. The updates are separate from patches produced by operating system companies such as Microsoft Corp.
A Russian cyberespionage group that has made international athletes a top target published a new set of stolen emails on Wednesday, seeking to highlight discord among global sports officials and the antidoping investigators who deconstructed Russia’s systematic doping.
The cyberespionage group — known as Fancy Bear and linked to Russia’s main military intelligence unit, the G.R.U. — called the communications evidence of “sports officials’ tension over the fight for power and cash,” pointing to antidoping authorities’ desire for independence from Olympic officials.
Donald Trump has cancelled a visit to Britain next month to open the new US embassy in London, amid fears of mass protests.
The president claimed on Twitter that the reason for calling off the trip was his displeasure at Barack Obama having sold the current embassy for “peanuts” and built a replacement for $1bn (£750m). “Bad deal,” he wrote.
But the embassy’s plan to move from Mayfair to Nine Elms in London was first reported in October 2008, when George W Bush was still president. The London mayor, Sadiq Khan, said Trump had “got the message” that many Londoners staunchly opposed his policies and actions.
President Trump caused a stir with his announcement that the United States had delivered F-52 fighter jets to Norway.
Was it a secret advanced jet capable of beating its Russian counterparts? A ruse to fool intelligence analysts? Neither, it turns out. The “F-52” is a fictional jet only available to fly if you’re a gamer at the controls of “Call of Duty: Advanced Warfare.”
Trump lauded the sale of the fictional planes alongside Norwegian Prime Minister Erna Solberg at the White House on Wednesday, remarking on the very real and growing defense relationship with America’s Northern Europe ally.
TRADE, PROTECTIONISM, REGULATION, OVERSIGHT
Mexico will leave the NAFTA negotiating table if U.S. President Donald Trump decides to trigger a 6-month process to withdraw from the trade pact, three Mexican sources with knowledge of the talks told Reuters on Wednesday.
“I think it’s indisputable that if Trump announces a U.S. withdrawal from NAFTA, well at that moment the negotiations stop,” said Raul Urteaga, head of international trade for Mexico’s agriculture ministry.
The Trump administration said on Thursday that it would allow states to impose work requirements in Medicaid, a major policy shift that moves toward fulfilling a conservative vision for one of the nation’s largest social insurance programs for low-income people.
SILICON VALLEY, UNICORNS, STARTUPS, VC
Financial technology startups are grabbing a greater share of capital from investors. Now Bono is getting in on the action.
The Rise Fund, a private investment firm co-founded by the U2 lead singer, is making its first known bet on a fintech business by backing Acorns Grow Inc., said people familiar with the matter, who asked not to be identified because the details are private. Acorns offers a stock-investing app tailored to people with small amounts of disposable income.
AUTOS, ELECTRIC, SELF-DRIVING
After years of predictions that Chinese technology companies were coming to America, the lineup at this year’s CES showed that they’re finally here.
Of the 4,500 exhibitors at the annual event — a global stage to showcase the latest developments in consumer electronics — more than a third are from China, according to statistics provided by the organizer. That’s more than any other nation except the U.S., home to the annual gathering in Las Vegas, and even Americans only outnumbered China’s 1,551 exhibitors by about 50 companies.
The biggest gadget show on the planet has become a key stomping ground for Chinese startups, especially makers of autonomous and electric vehicles, as they seek to disrupt the global passenger-car industry with new technology and woo investors. The nation’s Tesla Inc.-wannabes are not yet household names, but they’re aspiring to make significant inroads in the race to grab a slice of the world’s biggest vehicle market — and beyond.
Ford Motor Co said on Thursday it had confirmed a second death in an older pickup truck caused by a defective airbag inflator of Takata Corp and urged 2,900 owners in North America to stop driving immediately until they can get replacement parts.
The second largest U.S. automaker said it confirmed in late December that a July 2017 crash death in West Virginia in a 2006 Ford Ranger was caused by a defective Takata inflator. It previously reported a similar death in South Carolina that occurred in December 2015.
Ford said both Takata deaths occurred with inflators built on the same day installed in 2006 Ranger pickups. At least 21 deaths worldwide are linked to the Takata inflators that can rupture and send deadly metal fragments into the driver’s body. The faulty inflators have led to the largest automotive recall in history. The other 19 deaths have occurred in Honda Motor Co vehicles, most of which were in the United States.
Toyota Motor Corp. sees the grueling conditions of the Le Mans 24-hour endurance race as the ideal testing ground in its quest to build electrified cars rivaling those of Tesla Inc.
“An electric motor generates a tremendous amount of torque, while the high revs of an engine gives long acceleration,” Shigeki Tomoyama, a Toyota executive vice president and head of the GAZOO Racing in-house company responsible for sports car development, said after the unveiling of the new car. “By combining these two, there’s plenty of possibility to develop a new kind of fun-to-drive car that doesn’t currently exist.”
The package, disclosed Thursday by various officials, includes a $379.9 million incentive from the state of Alabama and $320 million from the city of Huntsville, where the plant will be based. The two Japanese auto makers evaluated several states in 2017 for the project, which is expected to create 4,000 jobs and make up to 300,000 vehicles a year by 2021.
Tax and other incentives have come to play a major role in luring companies to hire and invest in various regions of the U.S. Toyota already has major parts-making operations in Alabama and builds cars in several U.S. assembly plants, while Mazda’s U.S. presence is mostly confined to selling cars.
AEROSPACE, MILITARY & DEFENSE
A major SpaceX customer spoke up for Elon Musk’s rocket company, pinning the blame for a secret military satellite’s disappearance on defense company Northrop Grumman Corp.
Matt Desch, chief executive officer of satellite operator Iridium Communications Inc., said that as the launch contractor, Northrop Grumman deserves the blame for the loss last weekend of the satellite, which is presumed to have crashed into the ocean in the secretive mission code-named Zuma.
“This is a typical industry smear job on the ‘upstart’ trying to disrupt the launch industry,” Desch said on Twitter Thursday in response to a news article. “SpaceX didn’t have a failure, Northrop Grumman did. Notice that no one in the media is interested in that story. SpaceX will pay the price as the one some will try to bring low.”
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