WSJ : Top Saudi Royal Family Members Detained

Top Saudi Royal Family Members Detained
Move consolidates power for Crown Prince Mohammed bin Salman

Saudi Arabian authorities detained two of the kingdom’s most prominent figures for an alleged coup attempt, further consolidating the power of the king’s son, Crown Prince Mohammed bin Salman, and clearing away once-formidable rivals to the throne, according to people familiar with the matter.

The detentions occurred early Friday morning when guards from the royal court wearing masks and dressed in black arrived at the homes of the two men, took them into custody and searched their homes, according to people familiar with the matter.

Prince Ahmed bin Abdulaziz al Saud, a brother of Saudi King Salman, and Prince Mohammed bin Nayef bin Abdulaziz al Saud, the king’s nephew known as MBN, were both accused of treason, the people said. The guards also arrested one of MBN’s brothers.

The Saudi royal court accused the two men of plotting a coup to unseat the king and crown prince, according to people familiar with the situation.

The two men who potentially had once been in line for the throne are now under threat of lifetime imprisonment or execution, said people familiar with the situation. The details of the alleged coup attempt couldn’t be learned.

Prince Ahmed and MBN spent time as minister of the interior, a powerful position with oversight of troops and Saudi Arabia’s large intelligence service. MBN had close ties to U.S. intelligence and was respected for his knowledge of security and terror threats in the Middle East. But over the past few years, their standing in the royal family has diminished as King Salman consolidated power and installed his son Mohammed bin Salman—known as MBS—as crown prince and the kingdom’s day-to-day ruler.

The arrests cast aside two men who could have been rivals to MBS’s claim to the throne if 84-year-old King Salman died or decided to abdicate. MBN had been first in line for the throne as Salman’s crown prince until 2017, when MBS was elevated over him.

Early in MBS’s ascent, his social and economic reforms pleased many Western officials who had long called for the kingdom to lift restrictions on women and foster a more diversified economy, rather than remain heavily reliant on oil.

But the prince’s tactics for cracking down on corruption, silencing dissent and marginalizing rivals have since alienated many in the U.S. and Europe, especially in the time since MBS became crown prince. To curb corruption, MBS launched a surprise dragnet in 2017 that saw many of the kingdom’s most powerful businessmen and royals locked up in the Riyadh Ritz-Carlton Hotel and accused of ripping off the government. Many were only released after agreeing to pay tens of millions of dollars to the royal court.

The next year, Saudi dissident Jamal Khashoggi, a columnist for The Washington Post, was murdered and dismembered in Turkey by men working for MBS. The backlash presented the biggest threat yet to the crown prince.

In a further crackdown on dissent, Prince Mohammed has arrested online critics and used armies of Twitter accounts to criticize people who question his governance. Men working for him were also accused by the U.S. Justice Department last year of paying two Twitter employees for private information on dissidents.

The arrest of MBN follows sharp bipartisan criticism of Saudi Arabia in the U.S. Congress, where support for the kingdom already has waned because of Mr. Khashoggi’s killing and widespread civilian casualties in Yemen caused by a Saudi-led coalition using American-supplied weaponry.

MBN was for years a trusted contact for U.S. security and intelligence officials. As the head of Saudi counterterrorism efforts, he shared information with American counterparts about planned attacks and gained allies throughout the State Department and Central Intelligence Agency. Many U.S. officials were dismayed by his ouster in 2017, said several former intelligence and State Department officials, since they felt he was the U.S.’s most reliable ally within the royal family.

MBN has been under house arrest for much of the time since MBS stepped in front of him, though he did appear at private events during an investment conference last fall, said people familiar with the matter.

Prince Ahmed’s role has been more complicated. Since the death of Saudi Arabia’s founder, the crown has passed from one son to the next, always going from brother to brother. Some members of the royal family wanted to see the crown passed to Ahmed, the king’s brother, rather than to MBS, said people familiar with the matter.

Ahmed largely avoided politics since Salman took the crown, but in 2018 he made statements blaming problems in Saudi Arabia on King Salman and MBS when protesters approached him on the street by his London home. Not long after, said a person familiar with the matter, the royal court sent an emissary to London to persuade Prince Ahmed to return to the kingdom.

“Going back to Saudi right now is a big mistake,” a friend of the prince’s recalled telling him at the time. Ahmed, this person said, explained that he wasn’t worried because, while he was on bad terms with MBS, he had a good relationship with his brother King Salman. Ahmed returned shortly after to the kingdom.

While Prince Ahmed has been publicly quiet since then, members of the royal family spoke often in recent months about how he had removed the photographs of King Salman and MBS from the wall of his Majlis, a meeting area for those who come to visit the prince, said a person who participated in those discussions.

MBN has remained out of the public eye since he was shifted from the crown-prince role in a late-night move by MBS. He hasn’t been allowed to leave Saudi Arabia. His public appearances late last year gave some longtime acquaintances the impression that he might be given more freedom. But a few months ago, said a person familiar with the matter, MBS stripped MBN of key staff, including a longtime security guard, replacing them with royal court loyalists.

Ahmed, meanwhile, recently went on a regularly scheduled, weekslong hunting trip. He arrived home in recent days, and people familiar with the matter speculated that the arrests Friday might have been timed for Ahmed’s return.

>>> Chinese scientists discover two major subtypes of Covid-19

Chinese scientists discover two major subtypes of Covid-19

  • CHINA
  • Thursday, 05 Mar 2020
    4:17 PM MYT
BEIJING (China Daily/ANN): Chinese scientists have discovered the novel coronavirus has evolved into two major subtypes. Experts believe investigating the differences and features of these subtypes may help evaluate risks and formulate better treatment and prevention plans.
The two subtypes are named L and S. The L type is more aggressive and was prevalent in the early stages of the outbreak in Wuhan, Central China's Hubei province. But instances of the S type, which is older and less aggressive, have increased in frequency recently, thus possibly explaining the disease's slowing momentum in China.

In the study, scientists identified 149 mutations in the 103 sequenced genomes of the novel coronavirus. Experts believed these mutations took place recently and 83 of these mutations are nonsynonymous, meaning they can alter the amino acid sequence of a protein and may result in a biological change in the organism.
The study, titled 'On the Origin and Continuing Eolutionof SARS-CoV-2', was published on China's peer-reviewed journal, National Science Review, on Tuesday (March 3). The study was done by scientists from Peking University, Shanghai University and the Chinese Academy of Sciences.
However, the authors highlighted the fact the data examined in the study is very limited. How L type strains evolved from S type, as well as how these mutations would affect the transmission and pathogenesis of the virus, are still unknown.
"There is a strong need for further immediate, comprehensive study," they wrote.
In the paper, the scientists said the 103 novel coronavirus strains studied could be divided into two major types called L and S, with L being more prevalent and covering 70 per cent of the strains examined.
The S types are the ancestral strains, but the L types are believed to be more aggressive, multiply faster in humans and can spread more quickly than their ancestors.
Moreover, the L type is significantly more prevalent in Wuhan than in other places, according to viral samples.
After January, however, the L type's frequency of appearance decreased compared to the S type, which might explain the virus's slowing momentum in China.
Experts speculated this may be due to Chinese central and local governments taking rapid and comprehensive prevention measures that caused severe selection pressure against the L type. However, this hypothesis requires further study, they added.
Scientists also found most patients caught either the L or S type of novel coronavirus strain. But there might be exceptions to the rule that should be followed with further research.
For example, the study said a 63-year-old female patient in Chicago had likely contracted both L and S types of novel coronavirus strains when she travelled in Wuhan and returned to the United States on Jan 13.
A patient from Australia also was discovered to have possibly been carrying at least two different strains of the coronavirus when he returned.
"These findings evince the developing complexity of the evolution of SARS-CoV-2 infections," the paper said.
"Further studies investigating how the different alleles of SARS-CoV-2 viruses compete with each other will be of significant value."
This week, scientists from Brazil and United Kingdom said the genetic sequence of the virus collected from the first patient in Latin America is slightly different than the strain from Wuhan by three mutations. Two of these mutations draw the virus closer to a strain detected in Germany.
A virologist in Beijing who spoke on condition of anonymity said the purpose of the paper is to present "a fascinating finding" that the novel coronavirus already had two different subtypes existing in nature with different effects on humans.
"It is still too early to say if the virus has mutated into something more sinister, or more benign, for all we know the mutations might take place on part of the genome that do nothing at all," he said.
"The more we study the virus, the more secrets we unravelled. An interesting question we can explore next is whether patients that exhibited no symptoms were that way because they were infected with the older but milder S type strains. Only more research can tell." - China Daily/Asia News Network

>>> US Close Dow -0,98% S&P -1,71% Nasdaq -1,87% Russell -2%

Closing Market Summary: Market Remains on Edge as Growth Concerns Build

The stock market ended a volatile week on a lower note with the S&P 500 (-1.7%) settling just above its low from Monday. The benchmark index gained 0.6% for the week while the Dow Jones Industrial Average (-1.0%) outperformed, gaining 1.8% since last Friday.

The final session of the week was marred by a continued deterioration of sentiment due to the ongoing spread of the coronavirus while the pressure on growth expectations intensified. Treasuries essentially never stopped after Thursday's cash close, continuing their forceful charge in the overnight futures market. Treasuries did pull back from their highs in midday trade, but the long bond rallied to a fresh record high in the afternoon while the 10-yr note stopped a bit short of its best level of the day. The 10-yr yield fell 22 basis points to 0.71%, representing a 42-basis point drop for the week.

Expectations for another sharp rate cut remain in place with the fed funds futures market pointing to a 56.0% implied likelihood of a 75-basis point rate cut at or before the conclusion of the FOMC meeting on March 18.

The S&P 500 staged a 70-point rally during the final hour of trade, which led to a significant improvement in final sector standings, though all eleven sectors finished in the red.

Four groups surrendered 2.0% or more. Energy (-5.6%) and financials (-3.3%) were particularly weak throughout the day due to their exposure to growth and concerns about issuers of high-yield debt in the energy sector.

Bank stocks suffered from the drop in Treasury yields while energy companies struggled as oil fell $4.57, or 10.0%, to $41.32/bbl. The energy component ended the day at its lowest level since mid-2016 after OPEC+ could not agree to a sharp production cut despite yesterday's reports to the contrary. Russia's Energy Minister, Alexander Novak, said that OPEC+ countries are free to pump at will starting from April 1.

Airline stocks like Alaska Air (ALK 45.21, +1.75, +4.0%), JetBlue Airways (JBLU 13.88, +0.02, +0.1%), United Airlines (UAL 52.10, +0.51, +1.0%), and Delta Air Lines (DAL 45.89, +0.88, +2.0%) recorded gains on Friday after recovering from fresh multi-year lows. Alaska Air did warn that its guidance for FY20 should no longer be relied upon due to coronavirus-related uncertainty.

Shares of cruise operators started the day in positive territory but retreated as the day went on. Norwegian Cruise Line Holdings (NCLH 27.10, -1.49, -5.2%) was the weakest performer of the bunch, stopping just above its record low (24.16) that was notched when the company went public in early 2013.

In company-specific news, Costco (COST 311.28, -4.48, -1.4%) reported better than expected Q2 results, but the stock still finished lower. AMD (AMD 48.59, +0.48, +1.0%) fared better than the broader market after reaffirming its guidance for FY20. The chipmaker did caution that Q1 results are likely to be on the low end of its guidance.

The CBOE Volatility Index (VIX 42.14, +2.52, +6.4%) hit an 11-year high at 54.39%, before pulling back as the market jumped off lows in late trade.

Reviewing today's economic data:

  • February nonfarm payrolls increased by 273,000 (consensus 170,000). Job gains have averaged 243,000 over the last three months. January nonfarm payrolls revised to 273,000 from 225,000
    • February private sector payrolls increased by 228,000 (consensus 160,000). January private sector payrolls revised to 222,000 from 206,000
    • February unemployment rate was 3.5% (consensus 3.6%), versus 3.6% in January. Persons unemployed for 27 weeks or more accounted for 19.2% of the unemployed versus 19.9% in January
    • February average hourly earnings were up 0.3% (consensus +0.3%) after increasing 0.2% in January. Over the last 12 months, average hourly earnings have risen 3.0%, versus 3.1% for the 12 months ending in January
    • The average workweek in February was 34.4 hours (consensus 34.3), versus 34.3 hours in January
    • The labor force participation rate was unchanged at 63.4%
  • The trade deficit narrowed to $45.3 billion ( consensus -$46.0 billion) in January from an upwardly revised -$48.6 billion (from -$48.9 bln) in December.
    • The key takeaway from the report is that it featured a decline in both exports and imports; however, the understanding that this is a January report (i.e. doesn't capture the brunt of the coronavirus impact) will diminish market interest in it
  • Wholesale inventories decreased by 0.4% in January consensus -0.2%) after decreasing 0.3% in December
  • Total consumer credit increased by $12.00 bln in January (consensus $17.50 bln) after increasing a revised $20.20 bln (from $22.00 bln) in December.

There is no economic data on Monday's schedule.

  • Nasdaq Composite -4.4% YTD
  • S&P 500 -8.0% YTD
  • Dow Jones Industrial Average -9.4% YTD
  • Russell 2000 -13.1% YTD

FT : Very dark signals are coming from bond markets

Very dark signals are coming from bond markets
Damage to stocks from coronavirus crisis has been modest compared with fixed income

This week’s emergency dose of monetary medicine from the Federal Reserve is a clear health warning for equity and credit investors. As some quipped after the US central bank abruptly sliced borrowing costs on Tuesday, a rate cut does not inoculate portfolios from the threat of deeper economic and market turmoil.

The Fed deployed a similar playbook in 2008 and 2001 — years that were distinguished by frenetic bouts of market volatility. And there were many false dawns during those periods before asset prices stabilised and began recovering.

Because of the coronavirus outbreak, investors face a decidedly opaque outlook for economic activity and corporate profits over coming months. The severity of the outbreak could lessen during the spring — or an increasingly uncomfortable environment may emerge, similar to late 2007 and early 2008, when the magnitude of the financial crisis slowly became apparent.

These scenarios are illustrated to some extent by the contrast between government bond yields and broad equity benchmarks. Amid all the market noise, equities have been relatively resilient, wiping away just the past few months’ gains, implying little more than a short-term blow for corporate profits. Should the coronavirus fade relatively quickly, the combination of a weaker US dollar and lower bond yields — prompting fiscal spending around the world — could feed a recovery in economic activity and asset prices. 

That helps explain the correction in the FTSE All-World index, which from peak to trough in recent weeks is around 14 per cent. Declines in the region of 20 per cent to 30 per cent for broad equity markets are the hallmarks of a deeper economic contraction in the offing. This kind of drop has already been seen in US and European bank shares in recent weeks.

But the really dark signals are coming from the bond market, where the 10-year Treasury note is yielding well below 1 per cent — and a long away adrift of the current overnight mid-rate of 1.125 per cent set by the Fed. Look at real yields too, which are a guide to future growth expectations. The 10-year real yield has collapsed, nearing minus 0.5 per cent on Thursday. That suggests a deflationary shock, which is hardly good news for the economy or for corporate profits.

In that light, it seems too much to expect that coronavirus disruption will be limited. More economists are forecasting weak activity beyond the current quarter, as quarantines and restrictions curtail activity. Estimates of global growth this year are falling towards 2.5 per cent, a level that leaves little wriggle room for an extended economic shock. The Institute of International Finance notes that under its worst-case scenario, global growth could approach 1 per cent, down from 2.6 per cent last year and the weakest since the global financial crisis.

So this week’s action from the Fed, along with easing from central banks in Canada and Australia, reflects efforts to get ahead of tightening financial conditions. The release of the Fed’s latest Beige Book survey on Wednesday revealed supply chain disruptions and indicated that travel and tourism were already suffering late last month. It is therefore becoming harder to downplay the prospect of a bumpier outcome.

“The Fed is attempting to forestall this process long enough so when the real data finally catches up with the present dismal sentiment in risk assets, investors will have moved on to trading the stimulative and reflationary implications,” said Ian Lyngen at BMO Capital Markets. 

One particular problem could be a liquidity crunch, as small and medium-sized businesses struggle to obtain new funding. The big rise in debt over the past decade has been focused among non-financial companies, which are now facing disruption that threatens their ability to service and refinance those borrowings.

Analysts at Jefferies believe rollover risks “will ultimately determine whether global equities escape from Covid-19 with a mild slowdown in earnings growth”.

Long-term investors should do as they always do: look beyond bouts of market volatility and wait for opportunities to buy high-quality companies at a nice discount. 

But given the high starting point of valuations in both equity and credit markets, there is clearly scope for new lows before any clarity arrives. Dhaval Joshi at BCA Research estimates that the recent drop in equities means they are priced for an economic downturn lasting three months.

Investors with a longer timeframe of six to 12 months have yet to capitulate, it seems, which makes sense, given efforts to contain the virus that could limit its economic damage. But it is ominous that during the financial crisis, while some investors had capitulated by early September 2008, the bottom in stocks came about six months later.

Mr Joshi said investors should bear that in mind. “Financial markets have fully priced a downturn when the time horizon of investors that have fully capitulated equals the length of the downturn,” he said.

>>> US Gapping down

Gapping down

With US markets down ~3% in the pre-market, most stocks are trading lower. The following represents weakness based on specific catalysts

Gapping down
In reaction to disappointing earnings/guidance:

  • AOBC -26.7%, CHUY -5.4%, FNKO -4.8%, HRB -4.8%, SQ -3.2% (lowers guidance to reflect convertible note issuance), IMMR -2.8% (also reaches agreement with shareholder VIEX Capital for Board refreshment and strategy committee), SBUX -2.8% (provides coronavirus impact, China comps for MarQ will be down approx 50%), COO -2%, COO -1.9%, COST -1.7%, ADT -1.1%

Select financial related names showing weakness:

  • MS -4.8%, C -4.7%, JPM -4.4% (also - discloses that CEO Jamie Dimon Jamie experienced an acute aortic dissection; he underwent successful emergency heart surgery to repair the dissection; he is recovering well) BAC -4.2%, GS -4.2%, XLF -3.8%, WFC -3.8%, DB -2.7%, CS -2.4%

Select ETFs trading lower indicating broad based weakness:

  • XLE -4.2%, XLK -4%, QQQ -3.6%, XLI -3.5%, SPY -3.3%, DIA -3%, IWM -3%, IGV -2.9%, XLB -1.7%

Other news:

  • VGR -4.8% (cuts dividend in half)
  • WDC -4% (names new CEO)
  • ALXN -3.1% (presents long-term safety and efficacy results from the Phase 3 PREVENT study and open-label extension of SOLIRIS)
  • GPS -2.9% (appoints Sonia Syngal as CEO)
  • AZN -1.4% (provides update on Phase III DANUBE trial for Imfinzi and tremelimumab in unresectable, Stage IV bladder cancer; did not meet the primary endpoints)

Analyst comments:

  • KR -2.8% (downgraded to Neutral from Outperform at Credit Suisse)
  • LX -2.4% (downgraded to Hold from Buy at China Renaissance)

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance:

  • FIZZ +8.7%, ASPS +7.7%, LOCO +7.1%, NX +3.1%, AMD +2.2%, CYRX +1.6%, OKTA +1.6%

M&A news:

  • CBB +3.2% (Cincinnati Bell determines Macquarie Infrastructure and Real Assets constitutes A "Superior Company Proposal")

Other news:

  • BBSI +4.6% (names new CEO)
  • BIG +3.5% (shareholders Macellum and Ancora nominate 9 candidates for election to Board)
  • AMD +1.7% (stock rises during presentation; guidance)
  • HMST +1.6% (increases share buyback authorization)
  • WYND +1% (increases dividend)
  • BGG +1% (announced details of its planned strategic repositioning)

Analyst comments:

  • ABUS +1% (upgraded to Buy at Chardan Capital Markets)