30 August 2019

Juan Palenzuela

30 August 2019

Good morning,

Nobody, nobody will tear apart the peace agreement. But if they do, we will pick up every little piece and put it back together. The leader of the FARC, the now political party and former guerrilla group, is reserved, quiet and brainy. A medical doctor by training, Timoleón Jiménez, better known by his nickname, Timochenko, is far from your average guerrilla ideologue. As his tweet attests, he belongs to the pragmatic wing of the FARC that made the peace agreement, and the dusk of the armed conflict in Colombia, a reality.

The agreement, signed in 2016 between the group and the Colombian State, resulted in the FARC surrendering its weapons and becoming a political party with guaranteed seats in the congress. But the agreement has always been fragile. In 2018, Jesús Santrich, one of the FARC’s most prominent leaders, was arrested to face drug trafficking charges in the US. Later that year, Colombia elected a president that is openly hostile to the peace treaty. In June, Santrich disappeared just before his trial and wasn’t seen until yesterday.

Now Santrich has appeared next to other FARC leaders in a video announcing “a new phase of the armed struggle”. In total, three senior officers were in the video. Heading the group was Iván Márquez, second in command of the organisation and lead negotiator during the peace process; and El Paisa, another top FARC commander. Both Santrich and Márquez were due to take seats in congress, leaving the party without two very important spaces.

In response, the FARC said in a statement that those in the video have officially been separated from the party, and most FARC figures, Including Rodrigo Londoño, the group’s leader, rejected the move and called for everyone to adhere to the peace transition deal.

The new group of dissidents have put an unprecedented amount of pressure on the already fragile peace deal. Many of FARC’s leaders are missing amid growing hostility, and they could eventually join the new insurgency.

In reality, though, the peace deal is likely to withstand the storm, and these events will not alter Colombia’s risk profile significantly. Back in 2016, most of the FARC disbanded and surrendered its arsenal. Regrouping and rearming will take a considerable amount of time, effort and willingness from all of the top leaders, something that doesn’t seem possible so far.

 

News

After being spotted in the border, a number of tanks crossed the border from mainland China to Hong Kong. Chinese state media, which released images and video of the convoy, said that the military had completed a “routine annual rotation” of its forces in the territory. Demonstrations are due to take place over the weekend even though they weren’t officially approved by the authorities. 

Donald Trump announced the much-anticipated establishment of the US Space Command yesterday. The new command will address and manage threats to America's space assets and defend the country’s interest in space, what Trump called “the next war-fighting domain”. The president also said that a space force may soon follow. 

The Liberal Democrats won the Shetland by-election despite a high-profile SNP campaign. The Lib Dem’s Beatrice Wishart, who succeeded Tavish Scott MSP after his resignation, received 5,659 votes, against 3,827 for the SNP’s Tom Wills. 

 

Business & Economy

Brazil avoided falling into recession yesterday with the release of economic data showing that the country grew 0.4% quarter on quarter in the three months to June, a much better than expected result. The economy contracted by 0.2% in the first quarter. Many hope that the new data shows that the poor performance from the first quarter was a blip rather than the start of a renewed downturn. 

Over 400 jobs will be saved after TSP Projects, an infrastructure design consultancy owned by British Steel, was taken out of liquidation through a rescue deal with Systra, a French engineering and consultancy group. Meanwhile, Ataer Holdings, an investment group owned by the Turkish military pension fund, is undertaking final due diligence after being named preferred bidder for the rest of British Steel, which collapsed when the government rejected calls for a state bailout. 

Mike Ashley, Sports Direct’s founder and CEO, is facing a shareholder rebellion after the advisory firm Institutional Shareholder Services (ISS) joined calls with Glass Lewis and Pirc for Sports Direct investors to vote against Ashley’s tenure as director amid “significant operational and governance concerns”. Investors are due to meet on September 11 to decide the future of the company. 

 

Markets

What happened yesterday?

Stock markets finished the day up after assurances that China would not seek an escalation of the trade dispute with the US by immediately retaliating to Washington's latest round of tariffs. The Chinese government instead said that it was willing to resolve the issues at hand with a "calm" attitude. 

The FTSE 100 was up 0.98% at 7,184.32. Meanwhile, sterling held steady against both the US dollar and the euro, having tumbled on Wednesday on news that Prime Minister Boris Johnson had decided to suspend Parliament for five weeks. 

American stocks also enjoyed a boost: the Dow Jones Industrial Average was up 0.99% at 26,293.69, while the S&P 500 went up 1.06% at 2,918.53 and the Nasdaq Composite came out at 1.39% up at 7,965.74. 

What's happening today?

Interims
BBGI
Cathay Intl Ld 
Emis
Grafton Group
 
AGMs
Gear4music
Puma Vct 11
Stagecoach

UK Economic Announcements
(00:01) GFK Consumer Confidence
(07:00) Nationwide House Price Index
(09:30) Mortgage Approvals
(09:30) Consumer Credit
(09:30) M4 Money Supply

Intl. Economic Announcements
(07:00) Retail Sales (GER)
(10:00) Unemployment Rate (EU)
(13:30) Personal Consumption Expenditures (US)
(13:30) Personal Income (US) 
(13:30) Personal Spending (US)
(14:45) Chicago PMI (US)
(15:00) U. of Michigan Confidence (US)

 

Columns of Note

Writing for the FT, Megan Greene argues that in the current context, banks need to coordinate their actions to fend off global risks. Central banks around the world – and the Fed in particular – need to recognise that what they do spills over to the rest of the world. She says that taking this into consideration will lead to a better approach to monetary policy. The main reason is that floating exchange rates are simply no longer enough to absorb global shocks; and the use of the dollar around the world as a reserve currency. Greene believes central bankers have discovered that globalisation has gone so far it cannot be turned off, something many politicians deny. With slower global growth and fewer tools to respond to the next recession, they can’t avoid being their neighbours’ keepers. 

In Bloomberg, Andrea Felsted says that ditching plastics will be harder than expected for British supermarkets. It’s relatively easy to design plastic-free packaging for products sold at room temperature. But it's another story with food that is delicate and in many cases needs to be kept refrigerated. Instead of fighting for fewer plastics, the solution may lie in bringing the food source closer to the end consumer. Local production will extend shelf life without the need for plastics. Solutions such as vertical farming make this possible in urban areas, an area in which Ocado has been investing heavily recently. 

 

Did you know?

Squirrels' brains grow in size during autumn to help them remember where they bury their nuts. Their brains are smaller for the rest of the year.

 

Parliamentary highlights

House of Commons
In recess until 3rd September.
 
House of Lords
In recess until 3rd September.
 
Scottish Parliament
In recess until 2nd September.