After a week of New Year celebrations, Chinese markets today returned to the fray. Being the year of the dragon, many had expected fireworks on day one but all they got was, pardon the pun, a wet squib. Hotel bookings and air and rail ticket sales had indicated that the people are prepared to re-open their pocketbooks so many market observers had been pinning hopes on a wave of economic optimism gripping asset markets. It was, alas, not to be. At the time of writing, the Shenzhen index was up by a marginal 0.4 per cent. The Hang Seng was off by 0.9 per cent while its tech sub-sector had lost over 2.5 per cent. Much-anticipated news from the People’s Bank of China with respect to further monetary stimulus was also not forthcoming. Big recovery postponed or big recovery cancelled?

Meanwhile, the US markets will be closed today for George Washington’s birthday. What he might make of the kindergarten which the nation’s capital, bearing his name, has become is a matter best not dwelt upon.

I wonder whether, albeit with limited optimism, the death of Aleksei Navalny will shake up those involved in the daily party political cat fight and focus minds on the way in which that event will have changed the global power paradigm. It is clear, and will finally surely be to the last of those who were willing to offer Vlad the Invader even the faintest of threads of the benefit of the doubt, that an iron curtain has fallen across the world. Any hopes that Russia was willing to come to some pseudo-peaceful solution to the Ukraine war and to her future relations with the West might as well be buried. The fall to Russian troops of Avdiivka, for long precariously held by Ukraine, is a feather in Putin’s cap and a devastating loss for Ukraine. On cue, Volodymyr Zelenskiy showed up at the Munich defence conference pleading for more weaponry.

Longer-term readers will remember that when Russia invaded two years ago and even after the embarrassing stalling of the offence and the valiant fight-back by the Ukrainian army, I would never have put money on a Ukrainian victory. Anybody with the faintest of interests in or knowledge of Russian history will know that its potentates have no shame in sacrificing in prodigious numbers the lives of its young men. And the draw of the call of the motherland is strong. To those with time on their hands, I commend Antony Beevor’s epic work on the Russian revolution and civil war, from 1917 to 1921.  

Post-Navalny, I believe there to be a much larger issue at stake and it’s not about Russia’s presidential elections which we all know Putin is going to win in a canter. There are rumours of some poor Kremlin official having been arrested for inadvertently and prematurely releasing the 15-17 March election results. Sorry, my apologies for rehashing an old Soviet era joke. Joke? Maybe not. More seriously, however, and irrespective of the Western media’s excitedly reporting from the few locations on which flowers have been laid in Navalny’s memory, the vast majority of Russians stand four-square behind Putin and his perceived life and death struggle against the neo-imperialist tendencies of the nasty, US-inspired and led West. 

The brutal control of the media and the suppression of mothers’ protests demanding the return of their sons might keep public debate at bay but that does not mean, even if given the chance, the broad populous would turn on Putin and string him up from the nearest lamp post. Until we desist from trying to con ourselves into believing that Putin and his neo-Stalinism are not to the taste of the Russian people, we will remain on a losing wicket. And when we do finally grasp the nettle, what then? Spending 2 per cent, or even 3 per cent, of GDP on defence isn’t going to do it. We will need a thorough rethink of what we are prepared to put into our countries and what we expect to take out. As recently as the mid-1990s, we saw the Russian people’s ability for forbearance. That is something I do not imagine we would have.   

Of America’s eleven public holidays, six are always slated to fall on a Monday. George Washington’s birthday, for reasons known only to Americans, is one of them. His birthday was in fact 22 February, 1732, but let’s not get hung up on details. These are always tricky days in European markets. They might open five or six hours before New York, respectively, but on days when both the US bond market and the NYSE are closed, there is a palpable uncertainty to be detected in European price action. Even European government bond markets which really have next to nothing to do with US Treasuries tend to feel a little sticky. But with the tepid reopening of China and the events in Russia, today will not be fun. Nobody will be pushing to the front of the queue to pin the tail on the donkey.

Elsewhere, we have come through the weekend in the knowledge that the UK is back in recession, albeit only a technical one. Two consecutive quarters of negative growth and a “recession” it is called. Minus one per cent in one quarter, followed by plus 0.1 per cent in the next is not a recession but minus 0.1 per cent in two consecutive quarters is. Simple, eh?  There’s an old bon mot which has it that if your neighbour loses his job, it’s a recession. But if you lose your job, it’s a depression. Sure. With the Tory party in deep doo-doo and with Prime Minister Rishi Sunak struggling for credibility, both press and opposition are calling the newly minted recession (of -0.1% followed by -0.3%) Sunak’s Waterloo. Governments love to take credit for economic growth, but if they were to be given half a chance, they’d take credit for the weather, were it to be fine enough. If I’ve said it once, I’ve said it a thousand times: the economy is not made by a bunch of muppets in Westminster but by people across the country spitting in their hands and going to work. And it is there that the UK is so severely lacking.

It’s not how much people are producing. It’s how many of them are actually doing it. In an article earlier this month, Caitlin Allen wrote a piece for Reaction on “Sick note Britain”. In it, she revealed “The ONS – which revised its labour market data after previously underestimating the country’s population growth – has revealed that 21.9 per cent of adults aged 16 to 64 were neither working nor jobhunting in period from September to November. This revision – up from its previous estimation of 21.3 per cent – means that the number of economically inactive people in Britain has risen by nearly half a million to 9.3 million. The growing numbers who are opting out of Britain’s labour market is predominantly driven by rising ill-health. According to the new ONS figures, 2.8 million people in the UK now suffer from long-term health conditions – an upwards revision of 200,000, which is equivalent to the population of Norwich or Aberdeen”.

Caitlin went on: “According to the Institute of Fiscal Studies, around 40,000 new individuals of working age lodge a disability benefits claim each and every month, stating that they need financial help with their daily lives either because of physical or mental ill-health. Around 5.5 million received disability benefits in total in 2022-23, but if the current pace of growth continues, it’s estimated that another two million people will be on them by 2030. That would comprise one in nine of the population”. I challenge a politician of any hue to step up, call time on “sick-note Britain” and to cut the benefits.

So, off we trot into a new week. I would be surprised if in markets the shift in the Russia picture will be discounted. Will they have noticed that the opposition will no longer simply be silenced? It will with impunity be killed and, as we stand, that will continue. Putin will, it is said, kill hundreds but intimidate millions. The words of Navalny’s widow who spoke at Munich and who insisted that those guilty of her husband’s death will one day be brought to justice sounded hollow.

This is not a week replete with key economic releases so investors will have to make up their minds based on instinct. The futures markets are currently pricing US rates to be 5.08 in June and 4.43 per cent by the end of the year. I hear that Goldman’s have put out an S&P target of 5,200 pts for year-end 2024. That’s less than 200 pts or merely 3.5 per cent higher than where it closed on Friday. Given that we’ve already made 4.94 per cent a year to date and after only seven of the year’s 52 weeks, that number looks to me like the result of a game of darts. 

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