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UK Prime Minister Johnson avoids Luxembourg press conference on Brexit

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Xavier Bettel, Luxembourg’s prime minister, stands beside the empty podium of U.K. Prime Minister Boris Johnson following their Brexit meeting in Luxembourg, on Monday, Sept. 16, 2019. Johnson held his first face-to-face talks with European Commission President Jean-Claude Juncker over a working lunch of snails, salmon and cheese in Luxembourg.

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British Prime Minister Boris Johnson faced a barrage of protesters’ boos, and an exasperated message from his host, after an hour of talks with his Luxembourg counterpart in the normally quiet cobbled streets of this small European nation.

Johnson had hustled into a meeting with Xavier Bettel, the Luxembourg premier, following a nearby lunch with the European Commission’s outgoing president, Jean-Claude Juncker. On the menu at both occasions: Brexit, and the current UK government’s efforts to change elements of an existing withdrawal deal that its predecessor had agreed to almost a year ago.

The British leader subsequently left the prime minister’s residence Maison de Bourgogne in the centre of this small city-state in a hurry, ducking out of a press conference alongside his opposite number, Bettel. Moments later the latter did not hesitate to, as he put it, “mince his words.”

“It was important,” said Bettel, standing beside Johnson’s assigned but empty podium at a press conference prefaced by loud protests, to listen to British proposals “to avoid a no-deal Brexit.” But he insisted that he had seen “no concrete proposals for the moment on the table. And I won’t give an agreement to ideas.”

Away from the loud and rowdy crowd of anti-Johnson hecklers, the prime minister did provide a brief televised statement to the British media before he returned to London, and insisted both sides’ negotiators had already completed a lot of work.

Boris Johnson, U.K. prime minister, departs following a Brexit meeting with Luxembourg’s Prime Minister Xavier Bettel in Luxembourg, on Monday, Sept. 16, 2019.

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But he acknowledged the only obvious area of common ground to emerge from his first face-to-face meetings with Juncker and Europe’s chief Brexit negotiator Michel Barnier, was that talks should continue, more extensively and more frequently.

“Papers have been shared, but we are now at the stage where we really have to start accelerating the work,” he said, “and that was the agreement today.”

“I can see the shape of it, everybody can see roughly what could be done, but it will require movement.”

EU waits on UK proposal

Both critics and allies have described Monday’s meetings as political theater, and Johnson once more in Luxembourg reiterated that if a fresh agreement cannot be reached by late October, then his government would ensure the UK can exit the EU “on the 31st of October, deal or no deal.”

The encounter with Juncker was scheduled exactly one week after the Parliament in Westminster passed into law a measure designed to block the possibility of an abrupt and economically disruptive departure on October 31. 

And after their lunchtime sit-down at a local restaurant, Juncker and Johnson emerged to boos from protesters and were forced to negotiate a scrum of reporters and photographers.

Within minutes, the European Commission issued a press release which said the head of the EU’s executive branch had reminded the UK prime minister that it was now up to the British government to “come forward with legally operational solutions that are compatible with the Withdrawal Agreement.”

“President Juncker underlined the Commission’s continued willingness and openness to examine whether such proposals meet the objectives of the backstop. Such proposals have not yet been made,” it added, in a point soon echoed by Bettel.

Sterling weakened sharply to $1.24 after Johnson failed to appear at the press conference, after having trended downwards during much of the day’s trading.

The currency had enjoyed a strong rally against the U.S. dollar last week, since the passage of parliamentary legislation last Monday that was designed to rule out a no-deal exit in October.

Political allies of the prime minister continued to indicate over the weekend that Johnson may try to circumvent that new legislation, and might defy a parliamentary majority that wants him to request a Brexit deadline extension if he is unable to win significant concessions from Brussels in the coming weeks.

As a consequence the ostensible reason for Monday’s working lunch with Juncker had prompted some skepticism.

“He clocks up the miles/meetings and can argue he tried,” said Robert Hayward, a legislator belonging to Johnson’s Conservative Party, of the Luxembourg trip. In a message to CNBC, Hayward said that the Luxembourg trip will allow the prime minister to later argue, “it’s not his fault” if a new deal is not reached.

Anand Menon, a director at the think tank The U.K. in a Changing Europe, also posited it was about “giving the impression of having tried once he’s failed,” as Johnson seeks to change key clauses in the existing Withdrawal Agreement that three times failed to win parliamentary approval back in London.

Solving the backstop

The chief obstacle remains the complex question of how goods and services will be traded between the British nation of Northern Ireland and the separate Republic of Ireland. The border between the two countries could soon become the U.K.’s only post-Brexit land frontier with Europe, but one that must remain open under the terms of a 1998 peace deal signed by the British and Irish governments and known as the Good Friday Agreement.

Since then, Johnson and some of his senior government ministers have begun to outline how they hoped to solve the nine-month negotiating deadlock between the U.K. and the EU, by suggesting that European regulations might apply differently in Northern Ireland and the rest of the U.K.

This was an option that Theresa May repeatedly and categorically rejected last year, during a period when her government held on to its parliamentary majority thanks to support from a small political party in Northern Ireland (the Democratic Unionist Party or DUP) that remains adamantly opposed to any new divergence between the territory and the rest of the U.K.

The U.K.’s Brexit Secretary Stephen Barclay addressed the matter in an interview with Sky News over the weekend, when he said it was important that the U.K. “leave as a whole,” but mentioned there was already in place the potential for some divergence between Northern Ireland and the rest of the U.K. “We can get into those details as part of the talks,” he added.

The DUP no longer provides the Conservative-led government with that key parliamentary majority, after Conservative lawmakers defected or were stripped of their party affiliation for opposing the government’s position during recent legislative tussles.

Bim Afolami, a loyal Conservative lawmaker in Westminster’s lower chamber, the House of Commons, acknowledged ahead of the meetings that the prime minister might not be hoping to achieve a “huge amount” in Luxembourg. He instead echoed a common view that Johnson and his cabinet are “betting the house on getting something sorted at the European Council” in mid-October.

The Conservative Party Chairman James Cleverly, writing in the British newspaper The Sun, acknowledged it as a “crucial EU summit” where Johnson would “strive to get an agreement in the national interest.”

The almost bi-monthly council summits in Brussels have often served as political pressure-cookers, with late-night, caffeine-fueled deal-making between EU leaders on issues including the European debt crisis, Greece’s bailout or Brexit deadline extensions.

Barclay joined his boss in Luxembourg, as did his opposite number at the European Commission, Barnier, who told members of the European Parliament last week that his team had not yet received any backstop alternatives “in writing that are legally operational.”

He had told a group of senior lawmakers he was unable to say “objectively” if talks with Johnson’s government had so far indicated whether or not a new agreement might be reached before the October summit. But he nonetheless played down the possibility last week: “We don’t have any reasons to be optimistic.”

Bettel: ‘This is a nightmare’

And Bettel, the Luxembourg prime minister, said Monday he was not prepared to offer a further Brexit delay unless “it serves a purpose.”

And in response to a question about the possible extension of a separate transition period after Brexit, during which the UK’s trading relationship with the EU would remain unchanged while both sides continue negotiations over the future status of the Irish border, Bettel was blunt.

“This is a nightmare,” he told CNBC. “We should stop to think whether people would like to have a longer period of transition. People would love to have clarity, what is going to happen in London and what is going to happen in the EU, and what will be their position.”

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Morgan Stanley warns tariff escalation remains a ‘meaningful risk’

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President Donald Trump meets with China’s President Xi Jinping at the start of their bilateral meeting at the G20 leaders summit in Osaka, Japan, June 29, 2019.

Kevin Lemarque | Reuters

Morgan Stanley says President Donald Trump’s partial trade deal with China is an “uncertain” arrangement at best and there does not appear to be viable path to reduce existing tariffs at the moment. 

The U.S. agreed to suspend a tariff increase on at least $250 billion in Chinese goods to 30% from 25% set for Tuesday, but a tariff hike implemented in September was not rolled back and plans for another hike just before the the Christmas holiday on Dec. 15 remain in place.

Without a durable dispute settlement mechanism in place, another round of tariff increases cannot be ruled out, 
according to Morgan Stanley. 

“There is not yet a viable path to existing tariffs declining, and tariff escalation remains a meaningful risk,” the bank said in a note. “Thus, we do not yet expect a meaningful rebound in corporate behavior that would drive global growth expectations higher.”

The president said that the first phase of the trade deal will be written over the next three weeks. As part of phase one, China will purchase between $40 billion and $50 billion in U.S. agricultural products.

Evercore wrote that the first phase of the U.S.-China trade deal doesn’t clear the air for global corporations to decide on where to invest, produce hire or source. If the U.S. maintains a “stop the China rise” mentality perspective, the trade war will continue, the firm wrote.

“Trump’s statement that ‘We are near the end of the trade war’ is not plausible to us,” Evercore wrote in a note. “We do not expect tariff cuts in 2020 – but are ready to be favorably surprised.

“And as long as such punitive tariffs remain, we would describe US-China economic relations as bad, not good.”

Goldman Sachs sees a 60% chance that the announced 15% tariffs will take effect, but expects a delay until early 2020 as opposed to the current deadline of Dec. 15. Evercore said it expects a delay and no additional tariff hikes in 2020.

In the past year, the U.S. has set tariffs on billions of dollars worth of Chinese products, and China has retaliated with its own levies, igniting concern over slower global economic growth and weaker corporate earnings.

JP Morgan said the first phase of the deal is a positive development after months of trade escalation, but that the outcome is not a surprise for the market. It expects that US-China tension could escalate again, especially during the 2020 presidential election.

“Investors had high hopes for some form of mini-deal in the weeks before the meeting, and Friday’s announcement has at least been partially, if not fully, priced in,” the firm wrote.

Macro impact of the mini deal removes some downside risk in the next quarters, but does not affect the economic slowdown trend, JP Morgan wrote. The bank’s growth forecasts are 6.2% in 2019 and 5.9% in 2020.

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Typhoon leaves as many as 33 dead, 376,000 without power in Japan

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Helicopters, boats and thousands of troops were deployed across Japan to rescue people stranded in flooded homes Sunday, as the death toll from a ferocious typhoon climbed to as high as 33. One woman fell to her death as she was being placed inside a rescue helicopter.

Typhoon Hagibis made landfall south of Tokyo on Saturday evening and battered central and northern Japan with torrents of rain and powerful gusts of wind. The typhoon was downgraded to a tropical storm on Sunday.

Public broadcaster NHK said 14 rivers across the nation had flooded, some spilling out in more than one spot.

The Tokyo Fire Department said a woman in her 70s was accidentally dropped 40 meters (131 feet) to the ground while being transported into a rescue helicopter in Iwaki city in Fukushima prefecture, a northern area devastated by the typhoon.

Department officials held a news conference to apologize, bowing deeply and long, according to Japanese custom, and acknowledged the woman had not been strapped in properly.

The government’s Fire and Disaster Management Agency, which tends to be conservative in its counts, said late Sunday that 14 people died, 11 were missing and 187 were injured as a result of the typhoon. It said 1,283 homes were flooded and 517 were damaged, partially or totally.

Japanese media tallies were higher. Kyodo News agency reported that 33 people died and 19 were missing.

“The major typhoon has caused immense damage far and wide in eastern Japan,” government spokesman Yoshihide Suga told reporters.

News footage showed a rescue helicopter hovering in a flooded area in Nagano prefecture where an embankment of the Chikuma River broke, and streams of water were continuing to spread over residential areas. The chopper plucked those stranded on the second floor of a home submerged in muddy waters.

Aerial footage showed tractors at work trying to control the flooding and several people on a rooftop, with one waving a white cloth to get the attention of a helicopter. Nearby was a child’s school bag. In another part of Nagano, rows of Japan’s prized bullet trains, parked in a facility, were sitting in a pool of water.

A section of the city of Date in Fukushima prefecture was also flooded, with only rooftops of residential homes visible in some areas, and rescuers paddled in boats to get people out. Parts of nearby Miyagi prefecture were also underwater.

The Tama River, which runs by Tokyo, overflowed its banks, flooding homes and other buildings in the area.

Among the reported deaths were those whose homes were buried in landslides. Other fatalities included people who got swept away by raging rivers.

Early Sunday, Suga said that some 376,000 homes were without electricity, and that 14,000 lacked running water.

Tokyo Electric Power Co. said late Sunday that more than 66,000 homes were still without power. Tohoku Electric Co. said 5,600 homes still lacked electricity, in the northern prefectures of Miyagi, Iwate and Fukushima. Both utilities said they were working to restore power.

Several train services in the Tokyo area resumed early in the morning, while others restarted later.

Ruling party politician Fumio Kishida said the government would do its utmost in rescue operations, including making sure that those who moved to shelters were taken care of.

He acknowledged that Japan’s power grids need to be strengthened so people in disaster areas can rely on timely information.

“So many risks remain, and it is a reality that we must stay on guard,” Kishida said on news talk show on NHK. “We must do our utmost. In these times, a disaster can hit anytime.”

The Rugby World Cup match between Namibia and Canada, scheduled for Sunday in Kamaishi, in northern Japan, was canceled as a precautionary measure, but Japan played Scotland, to a win, as scheduled Sunday evening. Matches on Saturday had been canceled. Stores and amusement parks had also closed, and some Tokyo stores remained closed Sunday.

As the typhoon bore down on Saturday with heavy rain and strong winds, the usually crowded train stations and bustling streets of Tokyo were deserted. But life was returning to normal on Sunday, and flights that had been grounded from Tokyo airports were gradually being resumed.

Evacuation centers had been set up in coastal towns, with tens of thousands seeking shelter. Kyodo News agency said evacuation warnings had been issued to more than 6 million people.

The typhoon disrupted a three-day weekend in Japan that includes Sports Day on Monday.

The authorities had repeatedly warned that Hagibis was on par with a typhoon that wreaked havoc on the Tokyo region in 1958, but the safety infrastructure that Japan’s modernization has brought was apparent. The typhoon six decades ago left more than 1,200 people dead and half a million houses flooded.

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Saudi Arabia a precedent for fixing US-Russia relations

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Russia’s President Vladimir Putin (L) and Russian Direct Investment Fund CEO Kirill Dmitriev during a meeting with Russian Direct Investment Fund experts and representatives of international investment community at Konstantin Palace.

Mikhail Klimentyev | TASS via Getty Images

The head of Russia‘s $10 billion state investment vehicle is optimistic about repairing relations with Washington, he told CNBC on Sunday, pointing to Moscow’s growing bond with Saudi Arabia as a precedent.

Russia isn’t trying to fill a void in the Middle East left by what some describe as an inward-turning America, Kirill Dimitriev, chief executive of Russia’s sovereign wealth fund (RDIF) told CNBC’s Hadley Gamble in Riyadh. He insisted that Russia’s growing investments in and trade with Saudi Arabia should be seen as “building bridges” rather than engaging the strategic competition that many in the West regularly warn about.

“Really we are not talking about, you know, the strategic partnerships that Saudi has with the U.S., and what we are doing is not against the U.S. It’s actually building something that is very positive,” Dimitriev said. “And building something that helps Saudi economy, Russian economy — and builds the friendship between our nations.”

The CEO’s comments come at a time of frigid relations between the U.S. and Russia, as the latter remains under U.S. sanctions and has been accused by the U.S. intelligence community of meddling in the 2016 election and posing a continued threat to the presidential election in 2020.

Dimitriev pointed to his country’s blossoming friendship with Saudi Arabia — something that only four years ago was in serious doubt, given the animosity between the two during the Cold War. The last few years, by contrast, have seen the creation of a historic oil production alliance led by Riyadh and Moscow, increased trade and investment, and the first state visit by a Saudi monarch to Russia.

Russian President Vladimir Putin speaks during the 16th Valdai International Discussion Club meeting in Sochi, Russia on October 3, 2019.

Anadolu Agency | Anadolu Agency | Getty Images

“I think we need to go back to basics… I’m sure the Saudi example is very interesting to try at some point to restore the relationship with the U.S., because if we could do it with Saudi Arabia in four years, why can’t we do it with the U.S. going forward?” he asked.

“Many people didn’t believe that we’ll make much progress,” Dimitriev said of the relationship with the Saudi kingdom. “And it seemed too distant because Russia and Saudi Arabia were worlds apart. We had lots of differences during Soviet times. We had lots of differences in many politics in the Middle East. But now I can report to you that we made really breakthrough and this is a breakthrough because President Putin and King Salman and now Crown Prince Mohammed bin Salman really believed that it’s possible to bring Russia and Saudi Arabia closer together.”

New Saudi-Russia investment projects

Dimitriev, as chief of RDIF, is tasked with attracting inward investment to Russia in a wide range of sectors. In previous interviews with CNBC, he has often downplayed political tensions and espoused better relations to promote trade and investment. He has criticized U.S. sanctions on Russia, calling them unproductive. He has also vocally defended Michael Calvey, the American investor currently under house arrest in Russia on state charges of defrauding a Russian bank, allegations Calvey says are untrue.

RDIF already has investment partnerships with Saudi Arabia’s sovereign wealth funds, PIF and SAGIA. Saudi Aramco has made moves to invest in Russia’s energy industry, with the two companies agreeing on terms of an investment into Russian oilfield services firm Novomet earlier this year. The two countries also jointly invest in an energy fund through a Russian partnership with Saudi state oil giant Aramco, and are expected to announce 10 new investment projects in the oil and technology spheres on Monday.

Saudi Arabia has so far invested $2.5 billion of a $10 billion investment pledge into a number of Russian sectors, including energy, infrastructure and technology.

“This angle of Middle East-Russia-Asian markets is a very interesting angle because there are lots of growth opportunities in all those markets,” Dimitriev said. “Of course the situation in the Middle East is still quite volatile and we know about geopolitical tensions but there is no doubt that there is a major opportunity to grow the Saudi economy.”

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