The Jim Bakker Show

UK ‘Leave’ vote deflates hopes for U.S.-EU trade deal

By David Lawder

WASHINGTON (Reuters) – Britain’s looming exit from the European Union is another huge setback for negotiations on a massive U.S.-EU free trade deal that were already stalled by deeply entrenched differences and growing anti-trade sentiment on both sides of the Atlantic.

The historic divorce launched by Thursday’s vote will almost certainly further delay substantial progress in the Transatlantic Trade and Investment Partnership (TTIP) talks as the remaining 27 EU states sort out their own new relationship with Britain, trade experts said on Friday.

With French and German officials increasingly voicing skepticism about TTIP’s chances for success, the United Kingdom’s departure from the deal could sink hopes of a deal before President Barack Obama leaves office in January.

“This is yet another reason why TTIP will likely be postponed,” said Heather Conley, European program director at the Center for Strategic and International Studies, a think tank in Washington.

“But to be honest, TTIP isn’t going anywhere, I believe, before 2018 at the earliest,” she said.

U.S. Trade Representative Michael Froman said in a statement on Friday that he was evaluating the UK decision’s impact on TTIP, but would continue to engage with both European and UK counterparts.

“The importance of trade and investment is indisputable in our relationships with both the European Union and the United Kingdom,” Froman said. “The economic and strategic rationale for T-TIP remains strong.”

TTIP negotiators are still expected to meet in Brussels in mid-July as scheduled, but those talks were aimed at focusing on less controversial issues while leaving the thorniest disagreements for U.S. and EU political leaders to resolve. And it is unclear when Britain will launch formal separation proceedings, which will take at least two years.

But analysts said both sides have been reluctant to put their best offers on the table with a new U.S. president due to take office in January and French and German leadership elections nearing in 2017.

The Brexit also will preoccupy EU officials in coming months as they launch their own negotiations with London over the future terms of UK-EU trade, and sort out their post-Brexit priorities, said Hosuk Lee-Makiyama, director of the European Centre for International Political Economy, a Brussels-based think tank.

Britain’s departure could leave U.S. negotiators facing a European side that is more dug-in on some issues, said Chad Bown, a senior fellow at the Peterson Institute for International Economics, a think tank in Washington.

“As the UK is part of the coalition of liberal trading economies in the EU, the U.S. is losing one of the more like-minded countries from the group in Brussels sitting on the other side of the negotiating table,” said Bown, a former World Bank economist.

However, Lee-Makiyama, who also sees little chance of a deal before 2018, said Britain’s departure could eliminate one source of disagreement because the UK has insisted on a financial services chapter in the trade deal.

“The only real proponent of banking regulation in TTIP is the UK. Germany and France are probably willing to let it go,” he said. “It still leaves about 20 outstanding issues at nearly the same level of difficulty.”

The TTIP negotiations, which started three years ago, have unable to settle major differences over agriculture, where the EU side has shown little willingness to alter food safety rules that prohibit American beef raised with hormones or genetically modified foods, or open its closely guarded geographical food naming rules, such as for Asiago and feta cheeses.

European negotiators have complained that the United States has offered too little to open up its vast federal, state and local government procurement markets to European vendors with “Buy American” preferences in place.

Europe also wants access to key U.S. sectors such as maritime transport and aviation, while American negotiators have been frustrated over lack of access to some 200 European sectors ranging from healthcare to education.

The two sides also are far apart on how to resolve disputes. The U.S. side favors a traditional binding arbitration approach, while the Europeans want a court-like system that allows for appeals.

More progress has been made on harmonizing regulations for things like car seat belt anchors, clothes labeling and pharmaceutical inspections.

(Additional reporting by Phil Blenkinsop in Brussels; Editing by Jonathan Oatis)

Obama says UK relationship endures despite Brexit

President Obama delivers statement about Britain leaving EU

WASHINGTON (Reuters) – President Barack Obama said on Friday that strong U.S. ties to Britain and the European Union would endure after British voters chose to leave the EU in a referendum that sent U.S. officials scrambling to contain political and economic fallout.

“The people of the United Kingdom have spoken, and we respect their decision,” said Obama, who had argued passionately for close NATO ally Britain to stay in the group.

“The United Kingdom and the European Union will remain indispensable partners of the United States even as they begin negotiating their ongoing relationship,” Obama said in a statement.

Britain’s decision at a referendum on Thursday forced the resignation of Prime Minister David Cameron and dealt the biggest blow to the European project of greater unity since World War Two.

The vote threatened to damage the U.S. economic recovery, hurt Obama’s trade agenda and made it more difficult for America’s Western allies to face challenges such as Islamic State, the rise of China and climate change together in the Democratic president’s last months in the White House.

Obama administration officials are also casting a wary eye across the Atlantic at the success of Britain’s “Leave” campaign, which has similarities with Republican Donald Trump’s insurgent bid for the Nov. 8 presidential election.

Obama, during a visit to London in April, had warned against Brexit, or Britain’s exit from the EU, in an unusually strong intervention into British politics.

“I must say we had looked for a different outcome. We would have preferred a different outcome,” U.S. Vice President Joe Biden, traveling in Ireland, said on Friday.

Biden, in remarks prepared for a speech at Dublin Castle, took a swipe at Trump who won the Republican nomination by highlighting some of the issues, particularly immigration, that appear to have won support for Britain’s “Leave” campaign.

Without mentioning Trump by name, Biden warned against “politicians and demagogues peddling xenophobia, nationalism, and isolationism.”

TRUMP ON BREXIT

Trump thrust himself into the heart of the Brexit issue, calling the result of the vote a “great thing” and drawing parallels to his own unorthodox presidential campaign.

“People want to take their country back. They want to have independence in a sense. You see it with Europe, all over Europe,” Trump, 70, said in Turnberry, Scotland where he reopened a golf course.

Obama hopes his former secretary of state Hillary Clinton will win the November election and safeguard his legacy but economic volatility in the United States after Brexit could hurt her chances of beating Trump.

In response to Britain’s decision to leave, Clinton said the United States must first safeguard against any economic fallout at home at “this time of uncertainty” and underscore its commitment to both Britain and Europe.

With the Brexit result rattling Wall Street and other markets around the world, the U.S. Federal Reserve sought to calm global financial markets by saying it was ready to provide dollar liquidity following the British vote.

After Brexit, the U.S. central bank’s ambitions for two interest rate rises this year now look unlikely. Traders of U.S.-interest rate futures even began to price in a small chance of a Fed rate cut, and now see little chance of any hike until the end of next year.

“One can forget about rate hikes in the near term,” said Thomas Costerg, New York-based economist at Standard Chartered Bank. “What I’m worried about is that the Brexit vote could be the straw that breaks the back of the U.S. growth picture.”

The historic divorce launched by the Brexit vote could sink hopes of a massive U.S.-EU free trade deal before Obama leaves office in January.

Negotiations on the Transatlantic Trade and Investment Partnership, or TTIP, were already stalled by deeply entrenched differences and growing anti-trade sentiment on both continents.

(Additional reporting by Doina Chiacu and Ayesha Rascoe in Washington, Steve Holland in Scotland and Ann Saphir in San Francisco; Writing by Susan Heavey and Alistair Bell; Editing by Chizu Nomiyama)

Oil prices dive as Britain votes to leave EU

Voters for leaving EU, dropping oil prices

By Ahmad Ghaddar

LONDON (Reuters) – Oil prices slumped by more than 6 percent on Friday after Britain voted to leave the European Union, raising fears of a broader economic slowdown that could reduce demand.

Financial markets have been worried for months about what Brexit, or a British exit from the European Union, would mean for Europe’s future, but were clearly not fully factoring in the risk of a leave vote.

British Prime Minister David Cameron, who campaigned to remain in the EU, said he would stand down by October.

Brent crude <LCOc1> was down 4.85 percent or $2.47 at $48.44 a barrel at 1140 GMT. U.S. crude <CLc1> was down 4.6 percent or $2.31 at $47.80 a barrel.

Earlier in the day, both contracts were down by more than $3, or over 6 percent, the biggest intra-day declines for both since April 18, when a meeting of top global oil producers failed to agree on an output freeze.

Sterling <GBP=> sank 10 percent in value to its weakest since the mid-1980s. The FTSE 100 <.FTSE> fell more than 8 percent at the open, with banks among the hardest hit, but by 1140 GMT had recovered some ground to stand 4.3 percent lower.

“The global uncertainly that (the vote) is likely to unleash is likely to have a potentially negative effect on GDP growth, not only in the UK, but potentially in Europe,” said Michael Hewson, chief market analyst CMC markets.

“Obviously we don’t know that yet, but certainly in the context of where we were 24 hours ago, the knee-jerk reaction is to sell on the reality,” he added.

Some analysts said oil could face further downward pressure.

“Our view is that we have not yet seen the low oil price of the day with Brent likely to trade down towards $45 or lower before we have seen the worst of it,” Bjarne Schieldrop, chief commodity analyst at SEB, said in note to clients.

“Higher risk aversion is likely to make it hard for prices to regain the $50 per barrel mark in anything like the near future,” said Commerzbank analyst Carsten Fritsch.

BP <BP.L> said on Friday its headquarters would remain in the United Kingdom, despite the vote.

The vote to break with Europe is set to usher in deep uncertainty over trade and investments.

“Any further downturn in the economy or volatility in the oil price could cause further distress in the sector and in particular further project….deferrals might have significant consequence for the service sector who also rely on mobility of employees around the world,” PwC UK and EMEA oil and gas leader Alison Baker said.

(Additional reporting by Aaron Sheldrick in Tokyo and Florence Tan in Singapore; editing by Jason Neely)

Stock futures drop after Britons vote to abandon EU

By Tanya Agrawal and Yashaswini Swamynathan

(Reuters) – U.S. stock futures slid in premarket trading on Friday after Britain’s vote to quit the European Union delivered the biggest blow to the global financial system since the 2008 financial crisis.

S&P 500 futures and Nasdaq futures were down about 3.5 percent while those on the Dow Jones industrial average were off 2.8 percent, indicating Wall Street will open sharply lower.

By 8 a.m. ET (1200 GMT), the number of contracts traded on S&P futures had neared their daily average for the past year.

Investors worried about damage to the world economy sought refuge in the dollar and other safe-harbor assets such as gold and U.S. Treasury bonds, while dumping riskier shares. The yield on the U.S. 10-year bond hit its lowest since 2012.

Banks were among the biggest losers.

Britain’s FTSE 100 stock index was down 4.5 percent in early afternoon trading. Asian stocks also tumbled.

Amid the turmoil, sterling hit a 31-year low in its biggest intraday percentage fall on record and Prime Minister David Cameron said he would step down by October.

“The markets are going to trade violently and erratically through the day and it’s going to be a challenging equity environment until investors get greater clarity on the matter,” said Andre Bakhos, managing director at Janlyn Capital LLC in Bernardsville, New Jersey.

Citigroup <C.N>, Bank of America <BAC.N>, JPMorgan <JPM.N> and Goldman Sachs <GS.N> slumped by between 6.2 percent and 7.2 percent. U.S. banks have large operations in London.

Trading in S&P 500 and Nasdaq futures was halted briefly overnight after they fell more than 5 percent, triggering limit thresholds.

U.S. short-term interest rate futures rose amid speculation the Federal Reserve could cut interest rates to help shield the economy from any global fallout.

Investors have been waiting for the Fed to raise borrowing costs as the economy improves.

“It’s too early to assess whether we will have a negative interest rate environment. However, given the knee-jerk global response in the markets, it would seem that low interest rates are here to stay,” said Bakhos.

Fed Chair Janet Yellen said earlier in the week that an exit of Britain from the EU would have “significant repercussions” on the U.S. economic outlook.

Futures on the VIX <.VIX> volatility index – known as Wall Street’s fear gauge – surged 42.3 percent to 24.52, above its long-term average of 20.

The market was already expected to be volatile on Friday as traders adjust portfolios to account for an annual reconstitution of the widely followed Russell stock indexes.

Oil prices also slumped, dropping about 5 percent, the biggest drop since early February. [O/R] Exxon <XOM.N> and Chevron <CVX.N> were down about 3 percent each.

Among gold miners, Barrick Gold <ABX.N> was up 9.3 percent and Newmont Mining <NEM.N> was up 8 percent.

Apple <AAPL.O>, which got more than a fifth of its revenue from Europe last quarter, was down 2.7 percent at $93.48. Facebook <FB.O> was down 3.4 percent at $111.19

U.S. stocks had risen in recent sessions as investors bet that Britain would remain part of the EU.

As of Thursday’s close, the S&P 500 index had risen 3 percent since the start of the year.

Futures snapshot at 8:10 a.m. ET (1210 GMT):

* S&P 500 e-minis <ESc1> were down 73.25 points, or 3.48 percent, with 1,612,911 contracts traded.

* Nasdaq 100 e-minis <NQc1> were down 158.5 points, or 3.55 percent, on volume of 156,665 contracts.

* Dow e-minis <1YMc1> were down 504 points, or 2.81 percent, with 207,671 contracts changing hands.

(Additional reporting by Noel Randewich, Richard Leong and Rodrigo Campos; Editing by Alison Williams and Ted Kerr)

‘Explosive shock’ as Britain votes to leave EU, Cameron quits

By Guy Faulconbridge and Kate Holton

LONDON (Reuters) – Britain voted to leave the European Union, forcing the resignation of Prime Minister David Cameron and dealing the biggest blow to the European project of greater unity since World War Two.

Global financial markets plunged on Friday as results from a referendum showed a 52-48 percent victory for the campaign to leave a bloc Britain joined more than 40 years ago.

The pound fell as much as 10 percent against the dollar to touch levels last seen in 1985, on fears the decision could hit investment in the world’s fifth-largest economy, threaten London’s role as a global financial capital and usher in months of political uncertainty.

World stocks headed for one of the biggest slumps on record, and billions of dollars were wiped off the value of European companies. Britain’s big banks took a $130 billion battering, with Lloyds <LLOY.L> and Barclays <BARC.L> falling as much as 30 percent at the opening of trade.

The United Kingdom itself could now break apart, with the leader of Scotland – where nearly two-thirds of voters wanted to stay in the EU – saying a new referendum on independence from the rest of Britain was “highly likely”.

An emotional Cameron, who led the “Remain” campaign to defeat, losing the gamble he took when he called the referendum three years ago, said he would leave office by October.

“The British people have made the very clear decision to take a different path and as such I think the country requires fresh leadership to take it in this direction,” he said in a televised address outside his residence.

“I do not think it would be right for me to be the captain that steers our country to its next destination,” he added, choking back tears before walking back through 10 Downing Street’s black door with his arm around his wife Samantha.

Quitting the EU could cost Britain access to the EU’s trade barrier-free single market and means it must seek new trade accords with countries around the world.

The EU for its part will be economically and politically damaged, facing the departure of a member with its biggest financial center, a U.N. Security Council veto, a powerful army and nuclear weapons. In one go, the bloc will lose around a sixth of its economic output.

“It’s an explosive shock. At stake is the break up pure and simple of the union,” French Prime Minister Manuel Valls said. “Now is the time to invent another Europe.”

The result emboldened eurosceptics in other member states, with French National Front leader Marine Le Pen and Dutch far-right leader Geert Wilders demanding their countries also hold referendums. Le Pen changed her Twitter profile picture to a Union Jack and declared “Victory for freedom!”

The vote will initiate at least two years of divorce proceedings with the EU, the first exit by any member state. Cameron – who has been premier for six years and called the referendum in a bid to head off pressure from domestic eurosceptics – said it would be up to his successor to formally start the exit process.

His Conservative Party rival Boris Johnson, the former London mayor who became the most recognizable face of the “Leave” camp, is now widely tipped to seek his job.

Johnson left his home to jeers from a crowd in the mainly pro-EU capital. He spoke to reporters at Leave campaign headquarters, taking no questions on his personal ambitions.

“We can find our voice in the world again, a voice that is commensurate with the fifth-biggest economy on Earth,” he said.

‘INDEPENDENCE DAY’

There was euphoria among Britain’s eurosceptic forces, claiming a victory over the political establishment, big business and foreign leaders including U.S. President Barack Obama who had urged Britain to stay in.

“Let June 23 go down in our history as our independence day,” said Nigel Farage, leader of the eurosceptic UK Independence Party, describing the EU as “doomed” and “dying”.

On the continent, politicians reacted with dismay.

“It looks like a sad day for Europe and Britain,” said German foreign minister Frank-Walter Steinmeier. His boss Angela Merkel invited the French and Italian leaders to Berlin to discuss future steps.

The shock hits a European bloc already reeling from a euro zone debt crisis, unprecedented mass migration and confrontation with Russia over Ukraine. Anti-immigrant and anti-EU political parties have been surging across the continent, loosening the grip of the center-left and center-right establishment that has governed Europe for generations.

U.S. presidential candidate Donald Trump, whose own rise has been fueled by similar disenchantment with the political establishment, called the vote a “great thing”. Britons “took back control of their country”, he said in Scotland where he was opening a golf resort. He criticized Obama for telling Britons how to vote, and drew a comparison with his own campaign.

“I see a big parallel,” he said. “People want to take their country back.”

American Vice President Joe Biden said the United States would have preferred Britain to remain in the EU, but respected the decision.

Britain has always been ambivalent about its relations with the rest of post-war Europe. A firm supporter of free trade, tearing down internal economic barriers and expanding the EU to take in ex-communist eastern states, it opted out of joining the euro single currency or the Schengen border-free zone.

Cameron’s ruling Conservatives in particular have harbored a vocal anti-EU wing for generations, and it was partly to silence such figures that he called the referendum in 2013.

When he called the referendum, he thought it would be a sure thing. But the 11th hour decision of Johnson – a schoolmate from the same elite private boarding school – to come down on the side of Leave gave the exit campaign a credible voice.

Even until the last minute, bookmakers and financial markets had overwhelmingly predicted a Remain vote.

World leaders including Obama, Chinese President Xi Jinping, German Chancellor Angela Merkel, NATO and Commonwealth governments had all urged a “Remain” vote, saying Britain would be stronger and more influential in the EU than outside.

The four-month campaign was among the divisive ever waged in Britain, with accusations of lying and scare-mongering on both sides and rows over immigration which critics said at times unleashed overt racism.

It revealed deep splits in British society, with the pro-Brexit side drawing support from millions of voters who felt left behind by globalization and blamed EU immigration for low wages and stretched public services.

At the darkest hour, a pro-EU member of parliament was stabbed and shot to death in the street. The suspect later told a court his name was “Death to traitors, freedom for Britain”.

Older voters backed Brexit; the young mainly wanted to stay in. London and Scotland supported the EU, but wide swathes of middle England, which have not shared in the capital’s prosperity, voted to leave.

THREAT OF UK BREAK-UP

The United Kingdom itself now faces a threat to its survival. Scottish First Minister Nicola Sturgeon said it was “democratically unacceptable” for Scotland to be dragged out of the EU against its will.

“It is a statement of the obvious that the option of a second referendum must be on the table and it is on the table,” she told reporters, two years after Scots voted to stay in the United Kingdom. “I think an independence referendum is now highly likely.”

The global financial turmoil was the worst shock since the 2008 economic crisis, and comes at a time when interest rates around the world are already at or near zero, leaving policymakers without the usual tools to respond.

The body blow to global confidence could prevent the Federal Reserve from raising interest rates as planned this year, and might even provoke a new round of emergency policy easing from all major central banks, despite their limited options.

The Bank of England pledged a huge financial backstop to calm plunging markets. Governor Mark Carney said it was offering to provide more than 250 billion pounds ($347 billion) plus “substantial” foreign currency liquidity and it was ready to take additional measures if needed.

Other central banks around the globe also intervened in markets. The European Central Bank said it was ready to provide euro and foreign currency liquidity if necessary.

Left unclear is the relationship Britain can negotiate with the EU once it leaves.

To retain access to the single market, vital for its giant financial services sector, London may have to adopt all EU regulation without having a say in its shaping, contribute to Brussels coffers, and continue to allow free movement as Norway and Switzerland do – all things the Leave campaign vowed to end.

EU officials have said UK-based banks and financial firms would lose automatic access to sell services across Europe if Britain ceased to apply the EU principles of free movement of goods, capital, services and people.

Huge questions also face the millions of British expatriates who live freely elsewhere in the bloc and enjoy equal access to health and other benefits, as well as millions of EU citizens who live and work in Britain.

(Additional reporting by William James, Kylie MacLellan, Sarah Young, Alistair Smout, Costas Pitas, Andy Bruce and David Milliken; Writing by Mark John and Pravin Char; Editing by Peter Graff)

Dollar down vs. sterling, euro on bets Britain votes ‘Remain’

By Dion Rabouin

NEW YORK (Reuters) – Sterling hit its highest level of the year against the dollar on Thursday after opinion polls in recent days favored Britain staying in the European Union and bookmakers’ odds indicated a further shift toward the “Remain” camp.

The British pound and the euro were off their highs in late trading, but held onto gains against the greenback and Japanese yen as voters in the United Kingdom took to the polls to decide whether they would exit the EU.

An Ipsos MORI poll for the Evening Standard carried out on Tuesday and Wednesday, as well as an online Populus poll, showed over 50 percent support for staying in the EU.

Earlier polls by ComRes and by YouGov also showed a last-minute rise in support for remaining.

In addition to the murder of pro-EU British lawmaker Jo Cox last week, the increasing likelihood of a “Remain” vote was largely the result of campaigns by British and international politicians, including U.S. President Barack Obama, who lobbied Britons to stay, said Juan Perez, currency strategist at Tempus Inc in Washington.

“Even though 9-10 percent of those surveyed are undecided and that’s where things are hanging in the balance, it seems like there is a majority for remain,” Perez said.

Sterling <GBP=> rose to $1.4946, its highest against the dollar since Dec. 31, in early trading. The pound was last up 1.05 percent at $1.4852.

The euro <EUR=> touched a six-week high of $1.1421 against the dollar, also on the back of increased odds that Britain will remain in the 28-member European bloc. The currency was last up 0.5 percent at $1.1349.

Both the euro and pound also rose against the safe-haven yen, which took a beating as traders favored riskier assets. The euro <EURJPY=> was last up 1.8 percent against the Japanese currency, moving to 120.01 yen. Sterling <GBPJPY=> added 2.2 percent to 156.91 yen.

Analysts said the big moves in sterling and the euro were the result of bets from large institutions that had hired top polling firms to measure sentiment ahead of Thursday’s referendum.

The dollar hit its highest level against the yen <JPY=> in more than a week on Thursday. It was last up 1.4 percent at 105.80 yen.

Voting in the British referendum will end at 5:00 p.m. EST, with results expected early on Friday.

(Reporting by Dion Rabouin; Editing by Lisa Von Ahn and Andrew Hay)

Nervy global investors revisit 1930s playbook

Unemployed man during the Great Depression

By Mike Dolan

LONDON (Reuters) – Global investors are once again dusting off studies of the 1930s as fears of protectionism, nationalism and a retreat of globalization, sharpened by this week’s Brexit referendum, escalate anew.

With markets on tenterhooks over Thursday’s “too close to call” vote on Britain’s future in the European Union, the damage an exit vote would deal business activity and world commerce is amplified by the precarious state of the global economy and its inability to absorb any left-field political shocks.

As such, the Brexit vote will not be an open-and-shut case regardless of the outcome. Broader worries about global trade, frail growth and dwindling investment returns have festered since the banking shock of 2007/08 and have mounted this year.

Stalling trade growth has already led the world economy to the brink of recession for the second time in a decade, with growth now hovering just above the 2.0-2.5 percent level most economists say is needed to keep per capita world output stable.

Three-month averages for growth of world trade volumes through March this year have turned negative compared with the prior three months, according to the Dutch government statistics body widely cited as the arbiter of global trade data.

And it’s not a seasonal blip. Last year saw the biggest drop in imports and exports since 2009 and their average annual growth of 3 percent over the intervening seven years was itself half that of the 25 years before, according to Swiss asset manager Pictet. 2016 is set to be the fifth sub-par year in row.

A study published by the Centre For Economic Policy Research shows this paltry pace of trade growth is also below the 4.2 percent average for the past 200 years.

Foreign direct investment growth of 2 percent of world output is also at its lowest since the 1990s, while the hangover from the credit crunch has seen annual growth rates in cross-border bank lending grind to a halt from some 10 pct in the decade to 2008.

Parsing the big investment themes of the next five years, Pictet this month highlighted “globalization at a crossroads” – offering both benign and malignant reasoning and implications.

One of these was that trade deceleration was due in part to the inwards reorientation of the world’s two mega economies, the United States and China — the former due to the shale energy boom and the latter’s planned shift to consumption from exports.

Another factor cited was a shift in the world economy towards services and digital activity that is not captured by statistics on merchandise trade.

But Pictet had little doubt about what brewing developments could swamp all that — rising nationalism on the far right and left of the political spectrum in Europe and the United States.

Britain “threatens to drive a fault line” through one of the world’s biggest free trade blocs, it said, and both presumptive candidates for November’s U.S. presidential election have talked of renegotiating the still-unratified Trans Pacific Partnership binding economies making up 40 percent of world trade.

“If the rising tide of nationalism results in greater protectionism, then the decline in international trade the world has experienced so far could well morph into something more pernicious,” the Swiss firm said, adding that multinationals — particularly banks and tech companies — were most vulnerable.

“1937-38 REDUX?”

Against that backdrop, this year’s market wobbles make total sense — especially as near-zero interest rates limit central banks’ ability to insulate against further shocks.

But echoes of the last major hiatus in trade globalization during and between the World Wars has economists looking again to the 1930s for lessons and policy prescriptions.

In a paper entitled “1937-38 redux?”, Morgan Stanley economists detail the mistakes that saw monetary and fiscal policy tightened too quickly once a recovery from the 1929 stock market crash and subsequent Depression started in 1936.

Over-eagerness to reset policy before private sector confidence in future growth and inflation had picked up saw a relapse into recession and deflation by 1938. The devastation of World War Two followed, and with it huge government spending on military capacity, war relief and eventually reconstruction.

Morgan Stanley goes on to draw a parallel with the global response to 2008’s crash and subsequent world recession.

Waves of monetary and fiscal easing by 2009 underpinned economic activity, but government budgets have again tightened quickly and before inflation expectations or private investment spending and capital expenditure have been restored.

The second world recession in a decade is now seen as a threat, but with a heavier starting debt burden, historically low inflation and interest rates, stalled trade and a worsening demographic profile. That could mean another global government spending stimulus is needed to re-energize private firms.

“The effective solution to prevent relapse into recession would be to reactivate policy stimulus,” Morgan Stanley said.

Success in preventing a new recession without the cataclysm of a world war would be a profound lesson learned. Political extremism, isolation and protectionism make the task far harder.

(Editing by Catherine Evans)

Turkey’s arrest of prominent activists stirs protest

By Ayla Jean Yackley

ISTANBUL (Reuters) – Supporters of a pro-Kurdish newspaper on Tuesday protested against the arrest of three prominent activists facing terrorism charges in Turkey and said the government was tightening its grip on independent media in a case being watched by the European Union.

About 200 people chanted “The free press cannot be silenced” as riot police stood by outside daily Ozgur Gundem, a day after a court arrested Reporters Without Borders (RSF) representative Erol Onderoglu, author Ahmet Nesin and Sebnem Korur Fincanci, president of Turkey’s Human Rights Foundation.

The three had joined a “solidarity campaign” with nearly 50 other journalists to guest-edit the paper for a day each. Ozgur Gundem focuses on the Kurdish conflict and has faced dozens of investigations, fines and the arrest of a dozen correspondents since 2014. Other guest editors are also being investigated or prosecuted on terrorism-related charges.

“The court, directed by the palace and acting on its orders, once again has signed its name to a shameful decision and arrested our three friends,” editor Inan Kizilkaya said, referring to President Tayyip Erdogan’s office.

The presidency said it would not comment on court cases.

The arrests are a headache for the European Union, trying to keep a deal with Turkey on track to stop the flow of migrants to Europe, despite criticism from rights groups and concern from some European leaders about Turkey’s record on rights.

The EU, which Turkey seeks to join, said the arrests violated Ankara’s commitment to fundamental rights.

Turkey ranks 151 out of 180 nations on RSF’s World Press Freedom Index. It accuses Erdogan, Turkey’s most popular leader in a half-century, of an “offensive against Turkey’s media” that includes censorship and harassment.

“The jailing of Onderoglu and (Fincanci), two of Turkey’s most respected rights defenders, is a chilling sign human rights groups are the next target,” said Hugh Williamson, Europe and Central Asia director at Human Rights Watch.

Fincanci, 57, a professor of forensic medicine, is particularly well-known, having won the first International Medical Peace Award for helping establish U.N. principles for detecting and documenting torture.

KURDISH INSURGENCY

Erdogan has vowed to stamp out a three-decade insurgency by Kurdistan Workers Party (PKK) militants that flared anew a year ago after peace talks he spearheaded collapsed.

Left-wing Ozgur Gundem, which has a circulation of 7,500, has featured the writings of Abdullah Ocalan, the PKK’s jailed leader, and has published columns by senior rebel commanders. Turkey, the U.S. and EU list the PKK as a terrorist group.

The Index on Censorship says 20 journalists have been detained in Turkey this year. Most are Kurds working in the strife-hit southeast.

“The West, with its entire focus on the refugee crisis, has paved the way for Erdogan’s authoritarianism,” said Garo Paylan, a lawmaker in the Democratic Peoples’ Party (HDP), which has Kurdish roots and is the third biggest party in parliament.

Can Dundar, editor-in-chief of the secularist Cumhuriyet newspaper which is often at odds with Ozgur Gundem’s pro-Kurdish stance, on Tuesday took on the symbolic role of editor-in-chief.

Dundar was jailed for five years last month over coverage of alleged Turkish arms shipments to Syrian rebels, but is free pending appeal. He is aware he could be prosecuted again after his stint at the helm of Ozgur Gundem.

“If we don’t stand together, we will all lose. The time is now to support each other,” he told Reuters.

(Editing by Nick Tattersall; editing by Ralph Boulton)

EU allows Iran’s state carrier to resume flights in bloc

By Julia Fioretti

BRUSSELS (Reuters) – Iran’s state airline, which has just reached an agreement with Boeing Co to purchase new jetliners, can resume flights in the EU, the European Commission said on Thursday.

Iran is dangling the prospect of significant business for Western planemakers as it emerges from decades of sanctions.

While the European Commission, the EU’s executive, said Iranair could resume flights, some of the carrier’s aircraft would remain on the EU’s safety blacklist.

“I am happy to announce that we are now also able to allow most aircraft from Iranair back into European skies,” said EU Transport Commissioner Violeta Bulc. The Commission said the decision followed a visit to Iran by the EU executive in April.

The Commission also removed Indonesian budget carrier Lion Air, a major buyer of Airbus and Boeing jets, from its safety blacklist.

Iranair will be allowed to fly all of its planes in the EU except the Boeing 747-200s, Boeing 747SPs and Fokker 100s, the Commission said.

Iran needs an estimated 400 jets to renew its fleet and prepare for projected growth, according to Iranian and Western estimates.

Tehran said on Tuesday that it had reached an agreement with Boeing for the supply of jetliners, reopening the country’s skies to new U.S. aircraft for the first time in decades.

The Iranian flag carrier also agreed in January to buy 118 jets worth $27 billion from Airbus and is discussing further orders with Airbus.

The decision to remove Lion Air from the EU blacklist could also potentially lead to the Indonesian carrier buying more planes, analysts have said.

Lion’s five airlines operate a combined fleet of more than 200 aircraft, mostly Airbus A320s and Boeing 737s. The company, which plans a stock exchange listing possibly early next year, has around 500 more aircraft on order, and expects to take delivery of 40 aircraft this year.

The EU executive also removed Indonesia’s Citilink, Batik Air, Air Madagascar and all Zambian airlines from its blacklist.

(Reporting by Julia Fioretti; Editing by Susan Fenton)

Wall Street falls with oil, worries about global economy

By Caroline Valetkevitch

(Reuters) – U.S. stocks extended losses into a second day on Friday following another drop in oil prices and rising worries about the global economy ahead of Britain’s referendum on whether to stay in the European Union.

Ahead of Britain’s referendum on June 23, a poll showed those in favor of Britain exiting the EU, or “Brexit,” were well ahead of those who favor remaining. The British pound fell against the dollar.

“The inability of the S&P to even hold key resistance tells you the market is not ready to break out to new record highs,” said Adam Sarhan, chief executive of Sarhan Capital in New York.

“The global economy is weak and it can’t handle any major shocks. If Brexit occurs, that’s a major shock.”

The S&P energy index <.SPNY> was down 2.2 percent, leading sector losses.

At 3:14 p.m., the Dow Jones industrial average <.DJI> was down 165.18 points, or 0.92 percent, to 17,820.01, the S&P 500 <.SPX> lost 25.36 points, or 1.2 percent, to 2,090.12 and the Nasdaq Composite <.IXIC> dropped 77.64 points, or 1.57 percent, to 4,880.98.

Investors around the world swapped equities for less risky assets such as U.S. Treasury bonds and the Japanese yen. Yields on government bonds fell globally, to record lows in some cases, while the S&P financial index <.SPSY> was down 1.5 percent.

Jeffrey Gundlach, chief executive of DoubleLine Capital, said Friday investors are dropping risky assets because of falling global GDP expectations, fueled by China’s slowing growth and the intensifying U.S. presidential race.

Some stock investors are betting on a return of the volatility that marked the first two months of the year. The bounce-back in commodity prices that fueled much of the 13.3-percent rally in the Standard & Poor’s 500 index since its February lows is leveling off.

The CME Volatility index <.VIX>, Wall Street’s fear gauge, jumped 17.6 percent.

Among Wall Street’s few bright spots on Friday was Intel <INTC.O>, up 0.4 percent. Bloomberg reported the chipmaker would replace Qualcomm as an Apple <AAPL.O> supplier for some iPhones. Qualcomm <QCOM.O> was down 2.4 percent.

(Additional reporting by Yashaswini Swamynathan in Bengaluru; Editing by Savio D’Souza and Nick Zieminski)

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