9th December 2019

Written by Juan Palenzuela, Researcher

Edited by David Gaffney, Partner

Good morning,

The big issues shaping Europe over the past few years include a new wave of immigration, the rise of populism and, of course, the B word. But deep inside the Eastern reaches of the continent, a sleepy yet still active armed conflict continues to torment the lives of those living in the affected areas. The War in Donbass was ignited in 2014 when Russian-backed separatists took control of the cities of Donetsk and Lugansk, shortly after Russian forces seized the Crimean peninsula. Initially, Russia denied any involvement, but documented evidence produced since then has made those claims increasingly difficult to sustain. The war has so far claimed the lives of more than 13,000 people, including 120 in the current year to date. Nearly one and a half million others have been displaced. The relative lack of coverage and interest is rather odd given that the war is happening right here, in Europe. The frontlines are nearly as far from London as Aberdeen is from Gibraltar. Today, the presidents of Ukraine and Russia, Volodymyr Zelensky and Vladimir Putin, joined by the leaders of France and Germany, will meet in Paris to try to resolve the conflict. Multiple soldier exchanges have taken place since Zelensky’s election, in a bid to ease tensions with Moscow and set the tone for the coming round of negotiations. The route to peace is not straightforward, however. The US, although not formally involved in the current and previous negotiation attempts, has always been a significant voice, rallying the western states together to coordinate responses that could yield a solution. With the Trump-Ukraine scandal at its peak, though, political partisanship has ruined the possibility of a coherent US policy response on the matter, let alone cohesive actions from the West. This is all happening while the French president Emmanuel Macron has been seeking to normalise relations with Moscow. The lack of a coordinated response from the West doesn't make things any easier for Ukraine’s new president, who has stated that bringing an end to this conflict is his main priority. Nearly 18 months into his role, the country’s citizens will be looking for their trust in him to do so to be repaid.

News

Tens of thousands of protesters took to the streets in Hong Kong on Sunday, in what was the largest protest in months. Although the bill that sparked the start of the movement back in June was removed in October, protesters are now demanding an independent inquiry into alleged police brutality, amnesty for the nearly 1,000 protesters charged with offences, a retraction of the police’s assertion that protesters are guilty of rioting, and, more importantly, universal suffrage to elect the full legislature and chief executive. A maritime pact between Libya and Turkey that divides the Mediterranean for oil exploration, officially came into full effect on Saturday. The pact has angered Greece, as it covers most of its own Exclusive Economic Zone (EEZ). EU ministers are set to meet today to discuss the matter. A volcano erupted in New Zealand just a few hours ago, leaving one dead and several wounded. The police reported that 23 people had been rescued, but warned that the number of dead was likely to rise as the area is currently too dangerous for a rescue operation. On 3 December, a geological hazard monitoring website GeoNet warned that the volcano may have entered a period of high activity.

Business and economy

Goldman Sachs has announced plans to launch a digital robo-adviser next year, opening up digital wealth management services to individuals with as little as $5,000. The efforts are led by United Capital, a financial management firm acquired by Goldman last year. The company has faced declining profits in some of its traditional business activities, such as fixed-income trading and M&A advisory. Three years ago, it founded Marcus, a digital bank that offers savings accounts and personal loans to a broader spread of households in Europe and America. In order to reduce the shadow economy and boost tax revenue, the government of Greece has announced a plan to force Greeks to spend at least 30% of their income electronically or face fines. The government expects to raise more than €500m per year through the policy, although many worry that it will disproportionally affect those without access to electronic banking, especially the older, poorer segment of the population. The Chinese government has ordered all its government offices and public institutions to remove foreign computer equipment and software within the next three years. The move, which could affect companies such as HP, Dell, Microsoft and Apple, is part of a broader effort to reduce reliance on foreign technologies. American technology companies generate as much as $150bn a year in revenues from China, although much of that comes from private sector buyers. More importantly, the bulk of those sales comes from software alone, something that will be very difficult to replace given the lack of Chinese alternatives.

Columns of note

Writing for the Financial Times, Hector Torres argues that a tough job lies ahead for the next Argentine president, Alberto Fernández. Once the poster boy for the markets, Mauricio Macri, Argentina’s outgoing president, failed to meet expectations. Inflation soared and the combination of high inflation, decadent public infrastructure, rampant corruption and inconsistent policymaking made Argentina a no-go zone for investors. The macroeconomic orientation of Fernández, meanwhile, is still not entirely clear. He has vowed not to impose additional austerity on already impoverished Argentines. Above all, he may have to accept some of the IMF’s lending terms, but he will somehow have to manage the promises made to the electorate. The editorial board of the Financial Times argues that in the face of the global slowdown, governments around the world must use both monetary policy and fiscal stimuli. Traditionally, easing monetary policy has been the go-to response, but that needs to change according to the writers. Overly loose monetary policy has inflated asset prices and may be slowing productivity growth by keeping uneconomic businesses alive. Doing this also does not address the long-term structural challenges to manufacturing, however, which include the push towards carbon-neutral economies. To smooth structural transitions, governments must learn to borrow and spend significantly.

Markets

The week ahead

It is general election week in the UK, of course, among other major announcements and events.

Saudi Aramco will become the largest publicly-traded company in the world as it begins trading on Saudi Arabia’s Tadawul stock exchange on Wednesday with an expected market cap of $1.7 trillion (more than half a trillion larger than Apple’s market cap). Aramco also sold $25.6 billion in stock this week in the largest IPO in history, beating out Alibaba's $25 billion IPO from 2014.

On Thursday, the United Kingdom will head to the polls with the incumbent Conservative Party currently thought to be leading by approximately 14 points. As the chances of them forming a majority government have risen, so has the pound.

Lastly, two major central banks will announce rate decisions, with the Fed doing so on Wednesday and the European Central Bank on Thursday.

What's happening today?

Final Hardide Schroder Eur.r Interims Circle Prop The Panoply Ho.

AGMs Hadrian's Wall River Mer

Int. Economic Announcements

(07:00) Balance of Trade (GER) (07:00) Current Account (GER)

Did you know?

In a Roman hospital, doctors used to hide Jews from Nazi troops by putting them in quarantine for the extremely contagious "K syndrome". The syndrome didn't actually exist, but the soldiers wouldn't dare enter these rooms.

Parliamentary highlights

TODAY House of Commons The House will next sit on Monday 16 December 2019. House of Lords The House will next sit on Monday 16 December 2019.

Scottish Parliament No business scheduled.

TOMORROW

Scottish Parliament Ministerial Statement: Queen Elizabeth University Hospital Oversight Board Update

Ministerial Statement: Performance in Scottish education – the PISA 2018 Results and Achievement of Curriculum for Excellence Level 2018/19 Statistics

Scottish Government Debate: Reaffirming Scotland’s Support for Human Rights Defenders

Standards, Procedures and Public Appointments Committee Debate: Changes to the Code of Conduct

Member's Business: Easing the Burden and Pain of Miscarriage