26 June 2019

@AdamDShaw

26 June 2019

Good morning, 

The significance of the announcement by Jared Kushner, President Trump’s son-in-law and the adviser tasked with finding a solution to the Israeli-Palestinian conflict, that the US is scrapping the “two-state solution”, is hard to overstate.
 
It was the principle of the two-state solution that facilitated the famous handshake between Yasser Arafat and Yitzhak Rabin in 1993, and a similar encounter between Arafat and Ehud Barak at Camp David in 2000 – arguably the closest the conflict has ever come to being resolved.
 
However, in an interview with Al Jazeera aired yesterday ahead of the “Peace to Prosperity Workshop” being held in Bahrain, Kushner said: "I think we all have to recognise that if there ever is a deal, it's not going to be along the lines of the Arab peace initiative. It will be somewhere between the Arab peace initiative and between the Israeli position."
 
Whilst the direction of travel of recent months appeared to be leading to this outcome, for the US government to explicitly disown what has been the foundation for negotiations for decades marks a watershed moment.
 
There have been conflicting interpretations, but the two-state solution has generally been understood to mean two independent states – one Israeli and one Palestinian – following the borders established prior to the 1967 Six-Day War, with Jerusalem acting as the twin capital of both states.
 
With this framework now dead in the eyes of the Trump administration, Kushner’s focus is economic, suggesting Palestinians will benefit from nearly $30 billion in investment if they accept the political deal currently being drawn up.
 
Kushner described the blueprint as “the opportunity of the century” for the Palestinians.
 
However, there has been criticism that the “land for peace” formula is being replaced with “money for peace”, and it’s difficult to see how throwing money at the problem, with seemingly little attention paid to longstanding and deep-seated political issues, will yield results.
 
No representatives from the Israeli Government nor the Palestinian Authority are in attendance at the conference in Bahrain.
 
Furthermore, the Palestinian Authority cut ties with the US following the Trump administration’s decision to recognise Jerusalem as Israel’s capital, a move which departed from decades-long diplomatic convention and damaged the US ability to act as an honest broker.
 
Then there are the other variables, including another Israeli election and tensions with Iran.

All the indicators suggest that this will be yet another failed and ill conceived attempt to resolve the conflict.

News

Robert Mueller will testify in an open session before two Congressional committees on 17 July after he was subpoenaed by the House of Representatives Judiciary and Intelligence committees. The special counsel who investigated Russian interference in the 2016 presidential election had been hesitant to appear before Congress, however, Jerrold Nadler and Adam Schiff, the committee chairmen, said “Americans have demanded to hear directly from the special counsel,” in a joint letter.
 
The acting commissioner of US Customs and Border Protection has stepped down amid controversy over how undocumented migrant children are being treated at border detention facilities. John Sanders did not say explicitly why he was resigning but the agency responsible for enforcing President Trump’s hardline immigration policies is clearly in crisis. In an interview last week, Sanders blamed the problems on a lack of money and called for increased funding. The House of Representatives approved $4.5 billion in humanitarian aid yesterday, however, the White House has threatened to veto the bill.
 
Every child must learn about LBGT relationships before leaving school, the education secretary said yesterday. Damian Hinds said schools will be “strongly encouraged” to talk about same-sex parents with children and teach them about different types of “loving, healthy relationships”. The Department of Education had been criticised for not doing enough to stand up for head teachers during protests by parents and activists in Birmingham who are opposed to children learning about LGBT relationships. (£)

Business & Economy

Sky News reports that Neil Woodford is on the verge of appointing PJT Park Hill – a division of the investment bank PJT Partners – to sell a portfolio of private company holdings and raise hundreds of millions of pounds. The money generated from the sales would then be redeployed into more liquid stocks as the fund manager seeks a viable future for his business. Earlier this month, Woodford took the rare step of preventing investors withdrawing their money from his flagship Equity Income Fund, sparking a furore across the industry and a parliamentary inquiry.
                                 
Analysis by Oxford Economics has found that up to 20 million manufacturing jobs around the world could be replaced by robots by 2030, and that people displaced from those jobs are likely to find that comparable roles in the services sector have also been squeezed by automation. The economic modelling firm said that although automation will also boost jobs and economic growth, action is required to prevent an increase in income inequality as it is the least-skilled regions which will be most impacted.
 
The US Federal Reserve chairman raised expectations of an interest rate cut next month in a speech yesterday. Jay Powell spoke about trade tensions and falling business confidence, suggesting the central bank is unlikely to return to raising rates any time soon. However, it is not anticipated that the cut will be by more than 25 basis points after James Bullard, the president of the St Louis Fed, told Bloomberg TV that a rate cut of 50 basis points at the Fed’s next meeting in July “would be overdone”. (£)

Markets 

What happened yesterday?

US stocks tumbled yesterday due to geopolitical tensions and afternoon comments from Jay Powell. In a speech in New York, the Federal Reserve chairman highlighted concerns about the strength of the global economy and business confidence in the midst of trade uncertainty.
 
Whilst President Trump and Chinese leader Xi Jinping are set to meet at this week’s G20 summit, it is unclear what, if any, progress can be made between the two sides.
 
Powell also defended the central bank’s independence, underlining that it is “insulated from short-term political pressures”, in the face of renewed criticism from Trump for raising rates too quickly.
 
The S&P 500 was down 0.95% to 2,917.38, the Dow Jones Industrial Average fell 0.67% to 26,548.22 and the Nasdaq shed 1.51% to 7,884.72.
 
The FTSE 100 was the only major global index to see gains, rising 0.08% to 7,422.43, whilst the FTSE 250 dropped 0.07% to 19.286.51.
 
With tensions in the Middle East high, investors sought safe options, which helped to push the price of gold to a six-year high of $1,438 at one point, although it did slip back slightly.
 
As a result, FTSE 350 constituents Fresnillo, Centamin, Hochschild Mining and Polymetal all made gains.
 
International Airlines Group, parent company of British Airways, was the worst performer on the FTSE 100, falling 2.77%, due to concerns about the global outlook.
 
On the currency markets, the pound was down 0.38% against the dollar at $1.2691 and fell 0.13% against the euro to €1.1161.

What's happening today?

Finals
BCA Marketplace, Creightons, Stagecoach Group, Sysgroup
 
Interims
Autins Group
 
Trading Announcements
Tullow Oil, Wood Group (John)
 
AGMs
Air Partner, Amati AIM VCT, British American Investment Trust, Baron Oil, Datang International Power Generation Co Ltd., Federal Grid Company of Unified Energy System, Hummingbird Resources, Immedia Group, Impellam Group, LXI Reit, Next Fifteen Communications, Spinnaker Opportunities, Sumo Group, Trackwise Designs, Vianet Group, Watchstone Group

GMs
Konami Holdings Corporation
 
International Economic Announcements
(08:00) GFK Consumer Confidence (GER)
(12:00) MBA Moergage Applications (US)
(13:30) Durable Goods Orders (US)
(14:30) Crude Oil Inventories (US)

Source: FTSE 100, Financial Times

Columns of Note

In The TimesDaniel Finkelstein argues that Jeremy Hunt must attempt to create “Jeremymania”, the positive case for why he should be prime minister, rather than a negative campaign focussing on why Boris Johnson should not. He contends that Hunt needs to make Conservative members feel enthusiastic about his leadership, highlighting his qualities and solid track record – multilingual, a successful businessman, and the longest-serving health secretary who saw off a major industrial dispute – and let others hold Johnson to account. (£)
 
Writing in the Financial TimesMartin Wolf says we should approach Libra, Facebook’s cryptocurrency, with caution. Whilst acknowledging the benefits of the finance revolution – faster and cheaper payments, superior financial services and better risk management – he questions whether we can trust Facebook with our payment systems. Wolf asserts that a new global payment system must be evaluated for its technical stability, impact on monetary and financial stability and openness to fraudsters, criminals and terrorists. There are also questions about concentrations of power. He calls on regulators to fully understand the implications before allowing the plan to go ahead, and that Facebook’s involvement makes this even more necessary. (£)

Cartoon source: The Times

Did you know?

Neil Armstrong’s application to be an astronaut arrived a week past the deadline. Fortunately, a former colleague of Armstrong’s already working at NASA saw the application arrive late and slipped it into the pile before anyone noticed. 

Parliamentary highlights

TODAY

House of Commons


Oral Questions: Wales

Prime Minister’s Questions

Ten Minute Rule Motion: Football Regulation – Christian Matheson

Opposition Day Debate: Unallotted Half Day Debate on a Motion on Immigration in the name of the Scottish National Party - Ian Blackford, Kirsty Blackman, Stuart C. McDonald, Joanna Cherry, Liz Saville Roberts, Patrick Grady

General Debate: Armed Forces Day

House of Lords

Oral Questions

Increase in metal theft on the railway network, from construction sites and from churches - Lord Faulkner of Worcester
Requiring public bodies to act to ensure that the needs of the present are met without compromising the ability of future generations to meet their own needs - Lord Bird
IPPR’s report 'Social care: Free at the point of need - the case for free personal care in England' - Baroness Wheeler
Reports of a rise in the number of homophobic attacks - Lord Scriven

Legislation

Census (Return Particulars and Removal of Penalties) Bill [HL] - Third reading - Lord Young of Cookham
National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill - Second reading - Lord Young of Cookham

Scottish Parliament

Portfolio Questions: Communities and Local Government; Social Security and Older People

Ministerial Statement: Progress on Establishing the Citizens’ Assembly of Scotland, Scotland’s Constitutional Future

Ministerial Statement: Tackling Child Poverty Delivery Plan, First Year Progress Report

Scottish Government Debate: Working Group on Tenement Maintenance

Ministerial Statement: Transvaginal Mesh Update

Appointments to the Poverty and Inequality Commission

TOMORROW

House of Commons

Oral Questions: Exiting the European Union (including Topical Questions)

Business Statement: Business Questions to the Leader of the House - Mel Stride

Backbench Business

General Debate on the Children's Future Food Report - Frank Field
SERCO and asylum seeker lock-change evictions - Chris Stephens

House of Lords

Oral Questions

Government support to the World Food Programme - Baroness Anelay of St Johns
Recommendations of the review into post-18 education - Lord Blunkett
Proposals to grant a pension to the severely injured victims of the Northern Ireland conflict represented by the WAVE Trauma Centre - Lord Hain
Report by the UNs’ Special Rapporteur on extrajudicial, summary or arbitrary executions Investigation into the unlawful death of Mr. Jamal Khashoggi - Baroness Kennedy of The Shaws

Debate

Impact of government policy on knife crime - Lord Paddick
Impact of recent benefit changes on vulnerable people - Baroness Janke

Short debate: The 'Report on the Financial Conduct Authority’s further investigative steps in relation to RBS GRG' and what plans the Government have to mitigate against any future mistreatment of small and medium-sized enterprises - Baroness Bowles of Berkhamsted

Scottish Parliament

General Questions

First Minister's Questions