“Wall Street Has No Idea What’s Going to Happen to Credit Markets in 2018.”
It’s the season for investment banks to try to predict the future in credit markets. The ritual is trickier than usual this time. Rarely have they been so divided by a rally that seems to defy economic gravity — and those disagreements aren’t just from firm to firm, they’re between strategists on the same team.
“Where we are now is looking for a catalyst for a turning point, which is always challenging,” said Deutsche Bank AG strategist Nick Burns.
The strategists know their year-end outlooks could come back to haunt them. There’s the unpredictable White House and fiscal agenda, and the Federal Reserve and European Central Bank are unwinding or slowing down bond-buying programs.
Morgan Stanley and Deutsche Bank issued bearish projections at the end of 2016, only to see global corporate and high-yield bonds return 6 percent as the credit rally extended another year. With spreads on U.S. and euro-area corporate bonds close to post-crisis lows — leaving little margin for error — the challenge is to acknowledge the positive backdrop while hedging for the downside risks.
Deutsche Bank took the novel approach of publishing the calls of each member of its credit team before positing the house view. Germany’s biggest bank sees a buoyant first half and then a change in the second half, when declining central bank stimulus eventually pressures corporate debt’s tight valuations. “In markets so lacking in volatility it’s interesting to point out where we are different,” said Burns.
Bank of America Merrill Lynch and JPMorgan Chase & Co. see room for the rally to continue, citing ample global liquidity and aggressive risk appetite. Morgan Stanley, HSBC Holdings Plc and Societe Generale SA, on the other hand, find little to like in a crowded market late in the business cycle.
“Defying warnings of new conflict, Trump to recognize Jerusalem as Israel’s capital.”
President Donald Trump will announce on Wednesday that the United States recognizes Jerusalem as the capital of Israel and will move its embassy there, breaking with longtime U.S. policy and potentially threatening regional stability.
Despite warnings from Western and Arab allies, Trump in a 1 p.m. (1800 GMT) White House speech will direct the State Department to begin looking for a site for an embassy in Jerusalem as part of what is expected to be a years-long process of relocating diplomatic operations from Tel Aviv.
Jerusalem’s status has been a stumbling block in decades of on-off Israeli-Palestinian peace efforts. Israel considers the city its eternal and indivisible capital and wants all embassies based there. Palestinians want the capital of an independent Palestinian state in the east of the city.
One Palestinian envoy said the decision was a declaration of war in the Middle East. Pope Francis called for Jerusalem’s “status quo” to be respected, saying new tension would further inflame world conflicts, while China and Russia expressed concern the plans could aggravate regional hostilities.
Israeli Prime Minister Benjamin Netanyahu said on Facebook: “Each day there are very significant manifestations of our historic national identity – but today especially so. And I will have more to add on this later today, on a matter related to Jerusalem.”
The Palestinians have said Trump’s move would mean the “kiss of death” to the two-state solution. “He is declaring war in the Middle East, he is declaring war against 1.5 billion Muslims (and) hundreds of millions of Christians that are not going to accept the holy shrines to be totally under the hegemony of Israel,” Manuel Hassassian, the chief Palestinian representative to Britain, told BBC radio.
“Russia election: Putin to run again for president.”
Russia’s Vladimir Putin has said he will seek another term as president in next year’s election. He made the announcement in a speech to workers at a car factory in the Volga city of Nizhny Novgorod. «I will put forward my candidacy for the post of president of the Russian federation,» he said.
Mr Putin has been in power since 2000, either as president or prime minister. If he wins the March election he will be eligible to serve until 2024. Russian TV journalist Ksenia Sobchak has already said she will stand in the election but opinion polls suggest Mr. Putin will win easily. Russia’s main opposition leader, Alexei Navalny, has been formally barred from standing because he was found guilty of embezzlement – a charge he claims was politically motivated.
Mr Putin is popular with many Russians, who see him as a strong leader who has restored Russia’s global standing with a decisive military intervention in the Syrian civil war and Russia’s annexation of Crimea from Ukraine. But his critics accuse him of facilitating corruption and illegally annexing Crimea, which has led to international condemnation.
“DR Congo displacement crisis ‘worse than Middle East’.”
Conflict has forced 1.7 million people to flee their homes in the Democratic Republic of Congo this year, causing «a mega-crisis», aid agencies say. This means that for the second consecutive year, DR Congo is worst-affected by conflict displacement in the world, the agencies add.
DR Congo has been hit by years of instability, with rival militias fighting for control of territory. The conflict has been worsened by the failure to hold elections last year. «It’s a mega-crisis. The scale of people fleeing violence is off the charts, outpacing Syria, Yemen and Iraq,» the Norwegian Refugee Council’s DR Congo director, Ulrika Blom, said.
In a new report, the Internal Displacement Monitoring Centre said that an average of 5,500 people fled their homes every day this year. The reasons include new armed conflicts, a rise in existing conflicts and the delay in holding elections, the report said.
Despite there being four million displaced people, as well as more than seven million struggling to feed themselves, international aid has been slow to materialise, Ms Blom said.»If we fail to step up now, mass hunger will spread and people will die. We are in a race against time,» she warned.
DR Congo is a vast country with immense economic resources, but years of conflict has meant that most people live in poverty and there is little infrastructure. President Joseph Kabila took power in 2001 following the assassination of his father, Laurent Kabila. He has won two elections and the constitution bars him from running for a third term. His critics say the poll has been delayed so that he can remain in office. Mr Kabila’s government has been battling new conflicts in the last year, including in the central Kasai region where violence broke out after the government refused to recognise a traditional chief. At least 400 people have been killed in the conflict in the region, which is regarded as an opposition stronghold.