Main News From The Rollercoaster Weekend: Trump, North Korea, Brazil, Brexit

it was supposed to be a relatively quiet weekend, after what may have been the most dramatic, “turmoily” week for political and market news in years. It wasn’t.

As traders start focusing on the coming week, the weekend generated several key geopolitical headlines which will provide buzz – and potentially volatility  – on Monday morning. Below, courtesy of Citi, is a recap of this weekend’s major developments, focusing on the ongoing Trump-Russia investigations, the latest North Korea missile launch, the latest political scandal in Brazil and renewed confusion around Brexit.

North Korea

  • North Korea has fired another ballistic missile, according to various news agencies. South Korea first reported the test and according to BBC, “the White House said the medium-range missile had a shorter range than those used in North Korea’s last three tests.”
  • Being specific, BBC says this missile flew 560km (350 miles) towards the Sea of Japan versus last week’s range of 700km.
  • Keep in mind the latter missile test has been a source of concern among major world powers, given that its range represents some technology advancement on North Korea’s behalf and because North Korea has claimed this particular missile can hold a nuclear warhead.

Trump

  • Former FBI Director James Comey will testify before the Senate Intelligence Committee in a public hearing sometime after Memorial Day. CNN reported this late Friday citing a Senate statement.
  • CNN also ran a story over the weekend citing an unidentified source that Comey will indicate Trump tried to influence him. This is making top headlines but please do keep in mind that the validity of these claims is unknown.
    • The source seemingly tries to provide context to last week’s Comey transcript that some took to suggest Comey didn’t feel influences. It claims Comey had reached “no conclusion about the President’s intent before he was fired… But Comey did immediately recognize that the new President was not following normal protocols during their interactions.”
  • The father of Comey has also weighed in for a CNN interview.
  • J. Brien Comey believes his son’s firing last week “a Trump deal.” The 86-year old says: “[Comey] didn’t give him 100% loyalty, and he demands that of people who work with him.  [Comey] said he would give 100% honesty, but not loyalty.”
  • On Saturday, the NYT reported that the Intelligence Committee is also seeking another testimony. “Michael Caputo, who served as a communications adviser to the Trump campaign, has been asked by the House committee investigating Russian election meddling to submit to a voluntary interview and to provide any documents he may have that are related to the inquiry.”

Other domestic headlines

  • ThisWashington Post article details how politics could trip up the new special counsel, Robert Mueller. It is written by Neal Katyal, a former acting solicitor general, who claims he knows because he wrote the rules.
  • The weekend brought more news of candidates withdrawing their names for the new FBI Director search. According toThe Hill, the list is down to Senator Joe Lieberman, former Republican Oklahoma Governor Frank Keating and current acting FBI chief Andrew McCabe.
  • There’s been a lot of talk around Trump’s solid support base – and how this might keep Congressional Republicans from abandoning Trump. However, note the latest update fromThe Hill: “A new Reuters/Ipsos tracking poll, released Friday afternoon, showed the president with a job approval rating of 75% among Republicans. Political professionals generally view it as worrying for any commander-in-chief if his approval ratings with his own party dip below 85% — and downright alarming if they go below 80%.”
  • National Security Advisor McMaster has come out in defense of the President. When asked what he thought of Friday’s audio recording in which Trump called Comey “a real nut job” and said that he “faced great pressure become of Russia, McMaster responded: “Well, I don’t remember exactly what the president said. And the notes that there apparently have I do not think are a direct transcript… But the gist of the conversation was that the president feels as if he is hamstrung in his ability to work with Russia to find areas of cooperation because this has been obviously so much in the news.”
  • Secretary of State Rex Tillerson also spoke to Washington Post reports from Friday that a “significant person of interest” close to Trump is being looked at amid the investigation. Tillerson says he’s unaware of such. “I do not have any information or knowledge regarding the person of interest that’s been referenced.”
  • Where’s Vice President Michael Pence? The answer is that he’s not being overly vocal on developments but is a media focal point. A Politico opinion article explains why Pence could be in a “world of pain” if made the new President. The article explores how a Pence Administration might look from leadership to stances on key policies. CNBC did similar.
  • Other Pence coverage asks what he knows or doesn’t know about the latest developments.

International scene

  • The AP says Trump will try to forge partnerships in his speech to Islam leaders in Saudi Arabia. 
  • Citing what it believes to be an excerpt from Trump’s upcoming speech, the AP reports that he will try to deliver the message: “We are not here to lecture – to tell other peoples how to live, what to do or who to be. We are here instead to offer partnership in building a better future for us all.” 
  • Reuters says he will add: “Every time a terrorist murders an innocent person, and falsely invokes the name of God, it should be an insult to every person of faith.”
  • NYT featuresan articleclaiming that China may have crippled CIA operations.

Also ahead this week

  • Trump’s full budget is expected Tuesday, with Washington Post reporting that Republicans are already giving it the “cold shoulder.” The CBO score of the House’s Obamacare Repeal and Replace bill is expected on Wednesday. We also have special House elections ahead in Montana on Thursday.
  • Given that so much has already been leaked and previewed on the first two events, let’s focus on the latter.
  • To some, Montana’s special election might serve as somewhat of a “referendum” on Trump’s performance in office and particularly, opinions of how the Obamacare bill is playing out.
  • The Montana at large election is on May 25 to fill its single House seat. A few points to note:
    • Trump won Montana by 20% and this race is to replace Tom Zinke, who Trump selected to lead the Interior Department and won this very seat by ~80k votes.
    • The Republican candidate is Greg Gianforte and Democratic candidate, Rob Quist. Note Gianforte ran for governor of the state in 2016, losing by only 50%–46%.
    • Political strategists are debating how much fundraising will play a role in the race but at core, it might boil down to who best resonates with rural candidates. Chief industries of the state are agriculture, mining, timber, tourism, oil and gas.
    • Note that scoring of the Obamacare bill by the Senate will precede this election by a few days. Gianforte has come under pressure following release of leaked recordings, saying that he was “thankful for” the House passing the bill since it could lead to tax reform. Some haven’t taken his remarks as positive, criticizing that he avoided going on public record for his stance.
  • The second round vote for Georgia’s Senate seat to replace Health Secretary Price is also June 20.
    • The Republican candidate is Karen Handel, who came out strongly in favor of the Obamacare bill and is on-record, Trump supportive.
    • The Democrat candidate is Jon Ossoff, who earned 48% of the vote against Handel in the first round. Georgia law requires a majority, explaining why it is moving to second round, and while Ossoff’s lead looks large, it was so because 18 candidates were in the mix. Now, just two.
    • Of those 18, 11 were Republican. Many analysts therefore conclude that their votes will unify behind Handel but there remains concern that Ossoff will still pull through. There aren’t many polls available but the Gravis Marketing poll, surveying 870 likely voters between May 8-10, shows Ossoff leading 47%-45% with a 3.3% margin of error.

Brazil

  • “That clandestine recording was manipulated and doctored with [bad] intentions,” Brazilian President Temer has said over the weekend. Therefore, he is asking the Supreme Court to suspend its investigation of him until the recording can be analyzed by experts for authenticity.
  • Globo News says that the audio has already been analyzed by an expert named Ricardo Caires dos Santos, who found some inadequacies in the audio but ultimately believes that there was no editing done to the part of the tape that is most incriminating to Temer. Read more in the translated version of the Article here.
  • Brazilian Attorney General Rodrigo Janot has sent a letter to the Supreme Court asking for it to continue its investigation “since the investigation exists precisely for the investigation of the facts and for the production of evidence, among them technical expertise.” Essentially, Janot is saying his office has already had experts review the audio. Read more here.
  • Federal Supreme Court (STF) minister Luiz Edson Fachin is the justice that is carrying Temer’s petition forward. The Supreme Court will hold a session on Temer’s petition this Wednesday, May 24. This is according toFolha.
  • In addition to following the particulars of the Temer investigations, the Brazilian news focuses on the potential economic implications. Globo reports that the latest news may threaten more than USD60.5bn in infrastructure plans for 2017.
  • Temer’s claims were on the same day that he lost a major ally: the Brazilian Socialist Party, known as PSB. “Today’s decision, first of all, is to suggest to the president that, to help find a solution for our country, he should quit as fast as possible,” said the party’s leader of the decision.
  • As reported by Folha, the Federal Council of the OAB (Brazilian Bar Association) also decided Sunday to support the impeachment of Temer and make a request to be filed in the Chamber of Deputies.
  • Leaders of the PSDB Social Democrats – a Temer alliance – will hold a meeting on Sunday at about 19:00 BST/14:00 EDT on Sunday. According to local papers, its spokeswoman would not confirm what is on the agenda.

Brexit

  • Bloomberg reports: “The UK will quit talks on leaving the European Union unless the bloc drops its demands for a divorce payment as high as EUR100bn (USD112bn), Brexit Secretary David Davis said.”
  • “We don’t need to just look like we can walk away, we need to be able to walk away,” Davis said. “Under the circumstances, if that was necessary, we would be in a position to do it.”
  • Remember, it was reported on Friday that Brexit negotiations between the UK and EU will likely formally begin on June 19.

Source: Citi’s Aerin Williams


Source: ZeroHedge