A People’s Liberation Army Navy fleet — including the aircraft carrier Liaoning, submarines, vessels and fighter jets —takes part in a review in the South China Sea on Apr. 12, 2018.
Visual China Group | Getty Images
China has rejected Philippine allegations that a Chinese fishing vessel abandoned 22 Filipinos after it sank their boat in the South China Sea, as pressure builds on President Rodrigo Duterte to take a tougher line.
China’s embassy in Manila said the crew had sought to rescue the Filipino fishermen but fled after being “suddenly besieged by seven or eight Filipino fishing boats”.
“There was no such thing as (a) ‘hit-and-run’,” it said in a statement late on Friday, adding it would handle the issue in a “serious and responsible manner.”
The sinking took place on Sunday near the Reed Bank, the site of untapped gas deposits that an international arbitration court in 2016 ruled the Philippines had sovereign rights to exploit. Beijing disputes that.
The issue could complicate what are determined efforts by Duterte to build a strong relationship with China, despite deep mistrust among his U.S.-allied defense apparatus, which remains wary about China’s maritime militarization and what it sees as bullying and denial of Manila’s access to its own offshore oil and gas reserves.
Duterte has made no mention of Sunday’s incident during any of the lengthy and unscripted speeches he has since given. His defense minister, navy chief and spokesman have publicly denounced the Chinese crew and his foreign minister said he had lodged a protest with Beijing.
Presidential spokesman, Salvador Panelo, did not respond to a request for comment on China’s version of events.
Opposition Senator Risa Hontiveros on Saturday called for bilateral ties to be downgraded and said China’s denial was “preposterous” and the story made no sense.
She said Duterte had plenty to say about mundane issues, but should speak up when it came to sovereignty.
“Nothing is more reassuring to the public than to see and hear their own president, the supposed architect of the country’s foreign policy, telling them that he is on top of the situation,” Hontiveros said.
Sunday’s incident is the latest confrontation involving China’s vast fishing fleet, which experts say has been co-opted to serve as Beijing’s militia and augment its constant coastguard presence in waters also claimed by Malaysia, Taiwan, Vietnam, the Philippines and Brunei.
Philippines Supreme Court judge Antonio Carpio, a staunch critic of China’s maritime claims and conduct, said that among its massive fishing contingent were boats with reinforced steel hulls “purposely for ramming fishing vessels of other coastal states.”
“The Filipino people must send a strong signal to China that any new ‘grey zone’ offensive of ramming Filipino fishing vessels … will mean a break of diplomatic ties,” Carpio said in a statement late Friday.
Daimler, Bosch get green light for automated valet parking system
Daimler and Bosch have been granted approval to roll out an automated parking system in Stuttgart, Germany.
In an announcement Tuesday, German auto giant Daimler said that the automated valet service would be introduced at the parking garage of the Mercedes-Benz Museum. It will be accessed using a smartphone app and will not need a safety driver.
Daimler said that the system was the “world’s first fully automated driverless SAE Level 4 parking function to be officially approved for everyday use.”
Five “levels” of driving automation have been defined by SAE International, a global association of over 128,000 engineers and technical experts. At Level 4, a vehicle can drive itself under limited conditions and “will not operate unless all required conditions are met.” At Level 5, a vehicle’s automated driving features can drive it under all conditions.
Michael Hafner, who is head of drive technologies and automated driving at Daimler, said in a statement Tuesday that gaining approval from authorities in Baden-Wurttemberg set “a precedent for obtaining approval in the future for the parking service in parking garages around the world.”
Hafner went on to add that the project paved the way “for automated valet parking to go into mass production in the future.”
The infrastructure for the system in Stuttgart has been supplied by Bosch, with Daimler providing the technology in the vehicles, which display turquoise lighting to indicate they are in driverless mode.
When the driver of a vehicle with the appropriate technology reaches the car park, they get out and use their smartphone to send their car to a space. The vehicle then drives to that space and parks up.
Sensors from Bosch assess the “driving corridor” of the garage and its surroundings, sending the vehicle all the information it needs. The vehicle processes this data to plot its maneuvers and route, driving up and down ramps to move through the garage if required. If an obstacle is detected, the vehicle will stop.
Around the world, major businesses are working to develop autonomous driving systems. It was only last week that another car giant, Groupe PSA, announced it was conducting tests in the Spanish city of Vigo to “advance the development of autonomous driving”.
The collaboration with the Automotive Technology Centre of Galicia will focus on a number of areas, including the protection of vulnerable users; automated valet parking; autonomous driving in urban areas; and “optimal speed regulation” when vehicles approach traffic lights.
experts predict more pound weakness
The currency initially fell for a third day running during morning trade, plunging a further 0.4% against the dollar to reach a 27-month low. Investor jitters center around concern that Johnson could pull the U.K. out of the European Union without a formal deal in place.
But immediately after Johnson was announced as the country’s next leader, the pound pared its losses to trade around the flatline at $1.2474. Johnson’s rise to power had largely been priced in by the markets and the announcement meant one rung of uncertainty had been removed.
Johnson will deliver his maiden speech as prime minister outside 10 Downing Street on Wednesday. On Tuesday, Johnson struck a compromising tone, promising to “unite the country,” but reiterated calls for optimism on the prospect of the U.K. leaving the bloc.
Michael Brown, a senior analyst at Caxton FX, said his focus would quickly switch to the next steps: “Namely, Cabinet appointments and the Brexit plan. The latter will be of more importance for markets, with sterling set to remain under pressure should Boris continue his ‘do or die’ Halloween Brexit stance.”
Britain’s National Institute of Social and Economic Research (NIESR) published a report on Monday which suggested that there is now a 40% chance of a “no-deal” Brexit on October 31, an event anticipated by many to be profoundly damaging for the British economy.
Johnson has vowed repeatedly to take the U.K. out of the EU with or without a deal in place, while also rejecting the existing Withdrawal Agreement negotiated by his predecessor Theresa May, and pledging to return to Brussels to seek new terms.
In the past week, as 160,000 Conservative Party members cast their ballots to elect the country’s next leader, both Johnson and rival Jeremy Hunt hardened their stance on the Irish backstop clause insisted upon by Brussels, therefore increasing the likelihood of a no-deal departure.
In a recent note, Berenberg senior economist Kallum Pickering raised the risk of a hard Brexit — in which the U.K. exits both the EU’s customs union and its single market to trade on World Trade Organization terms — to 40%, making it Berenberg’s base case.
However, as Pickering pointed out, Johnson has a reputation for adapting his rhetoric to changing tides of political sentiment. A Conservative member of the House of Lords, Michael Heseltine, once described Johnson as “a man who waits to see the way the crowd is running and then dashes in front and says ‘follow me’.”
Speaking to CNBC Monday, Pickering said an unresolved Brexit was like a “kidney stone lodged in the abdomen of the British economy,” and projected greater sterling weakness until a resolution is found.
In a further note Tuesday, Pickering suggested that Johnson’s promise to scrap the Irish backstop from the Withdrawal Agreement may just be a high-risk negotiating strategy, with a low chance of success, to push for compromise from Irish Prime Minister Leo Varadkar to accept a half-way deal. If the EU refuses Johnson’s demand, Pickering predicted, moderate British lawmakers could move to thwart a no-deal exit, setting the stage for a “major showdown in Parliament” in the fall. This could lead to a further Brexit extension, a snap election or a second referendum.
“While Johnson may be forced to take a more pragmatic line eventually, we do not expect him to use soft words on Brexit in his first speech,” Pickering wrote on Tuesday.
“In the not-unlikely event that he doubles-down and appears to harden his Brexit stance further, U.K.-oriented equities and sterling would likely react negatively.”
Boxed into a hard Brexit
Two further developments suggest that the hard Brexit risk has increased. Ahead of his anticipated coronation, Johnson has been surrounding himself with hardliners likely to box him into pursuing the exit door on Halloween come what may. As he begins to name his Cabinet this week, the extent of the euroskeptic makeup of his ministers could further impact the currency.
Meanwhile, the main opposition Labour party is sliding in the polls, rendering it a lesser threat in the event of a snap general election and potentially leading moderate Conservative members of parliament (MPs) to back no deal, in order to protect their seats from the surging Brexit Party.
The odds of an election in the fall are rising sharply. Stephen Gallo, European head of FX strategy at BMO Capital Markets, said in a note Monday that Johnson will have an “incredibly narrow window of opportunity” to exploit Labour’s vulnerability, cut a deal with the Brexit Party to preserve Conservative seats, and lay out a post-EU and domestic policy agenda.
“That window starts to close rapidly by the end of the year, and there is no telling what 2020 will bring without a new parliamentary arithmetic for the Tory (Conservative) leadership to work with,” Gallo said.
“We still believe there is more GBPUSD weakness to come.”
Kamal Sharma, director of G-10 FX strategy at Bank of America Merrill Lynch, said the combination of Brexit factors weighing on the U.K. economy meant a potential “flash crash” for sterling could not be ruled out.
“The current account deficit has been the Achilles heel for the U.K. for a number of years now. Historically, the U.K. has been a very big recipient of FDI (foreign direct investment),” he told CNBC’s “Squawk Box Europe” on Monday.
“It’s now becoming more of a net debt story, so if investors start to suddenly give up on the U.K., for example, given the liquidity situation of sterling already, that really opens us up to a potential flash crash.”
Things can only get better
However, not all analysts were quite so pessimistic. Giles Keating, senior advisor at Torchwood Capital, told CNBC Tuesday that most of the bad news is already priced into sterling and investors could “start to look forward.”
“What do you look forward to? Fiscal expansion — can the Bank of England react to a big fiscal expansion by cutting interest rates? It doesn’t seem to me to make sense. That debate could end up being to hold rates here at a time when others were cutting them,” he told CNBC’s “Squawk Box Europe.”
“The Bank of England is looking at an economy where wages are accelerating. The latest wage rises are really moving up sharply, we had the National Institute warning yesterday of 4% inflation as a risk — the Bank, in my mind, can’t cut against that background.”
Europe is at odds over who will replace Christine Lagarde at the IMF
International Monetary Fund (IMF) managing director Christine Lagarde speaks during a press conference in Tokyo on October 4, 2018.
Kazuhiro Nogi | AFP | Getty Images
European officials are still scratching their heads over Christine Lagarde’s successor at the International Monetary Fund (IMF), according to several people with knowledge of the discussions, with no standout candidate for the role.
Lagarde is due to start her new job as president of the European Central Bank (ECB) in November, leaving the IMF’s chair empty. In Europe, EU member states agree that the next IMF managing director needs to be from the continent — but they’re struggling to rally behind one particular name.
“The truth is that there is no readily available tried and tested European all-rounder,” a European minister, who did not want to be named due to the sensitive nature of the talks, told CNBC.
There is no official shortlist of candidates, but many governments of EU nations have put forward a name to take the top job. Some of the non-official candidates are:
- Jeroen Dijsselbloem, former Dutch finance minister and president of the Eurogroup (which brings together the 19-euro zone finance ministers).
- Mario Centeno, the Portuguese finance minister and currently Eurogroup chief.
- Nadia Calvino, the Spanish finance minister.
- Olli Rehn, central bank governor of Finland and former European commissioner for the euro.
- Mark Carney, the current governor of the Bank of England — a Canadian citizen who also has Irish and English passports.
- Kristalina Georgieva, from Bulgaria, who is currently serving as chief executive of the World Bank.
- Mario Draghi, the outgoing ECB president.
According to two other European officials, who also preferred to remain anonymous, none of the candidates have the right profile at this stage. Some names also don’t have enough experience or they are not liked by certain governments due to their political affiliation, their past comments or their background, the officials told CNBC. Since the IMF’s formation back in 1945, the managing director has always been from Europe.
There is also an age restriction to deal with. The IMF’s rules state that managing directors must be under 65 years of age when appointed and cannot serve beyond their 70th birthday. As such, the chances of certain candidates, such as Kristalina Georgieva, become much smaller.
“If (the) age limit is adapted to today’s realities, there is Georgieva and Draghi,” the European minister told CNBC.
France, who’s chairing the discussions across the different EU capitals, is reportedly looking at ways to change the laws. However, it is unclear whether that idea would be approved inside the IMF.
A source within the French government told CNBC that Paris “does not have a preferred candidate and will play its coordination role impartially.” Meanwhile, a separate EU official confirmed to CNBC that the aim is to have an agreement by the end of the month.
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