Thursday, 17 June 2021


Covid was made in a lab: experts

Evidence that SARS-CoV-2 was engineered in the Wuhan Institute of Virology and leaked accidentally, killing around six million people globally, was now “overwhelming” according to scientists.
Evidence that SARS-CoV-2 was engineered in the Wuhan Institute of Virology and leaked accidentally, killing around six million people globally, was now “overwhelming” according to scientists.

The chance that SARS-CoV-2 emerged naturally from animals in China is “one in a million”, ­according to top scientists who say the world risks biological world war if controversial “gain of function” research into viruses is not shut down immediately.

Steven Quay and Richard Muller said the evidence that SARS-CoV-2 was engineered in the Wuhan Institute of Virology and leaked accidentally – killing about six million people globally – was now “overwhelming” and was being ignored mainly for ­career or ­political reasons.

Professor Muller, 77, an astrophysicist from the University of California, Berkeley, said the pandemic had illustrated the next world war would be “biological, not nuclear”.

“If you have a bioweapon and a vaccine for your own people, you can wreak devastation on economies of competing countries with very little loss to yourself. This is a genuine threat,” he said at a conference organised by the Hudson Institute in Washington DC.

Dr Quay, the chief executive of Nasdaq-listed Atossa Therapeutics and author of hundreds of peer-reviewed scientific ­papers, said advances in vaccines and virus research had “opened the floodgates where you can have a bio weapon in the morning and have a vaccine in the afternoon”.

He said the probability that SARS-CoV-2 emerged naturally, based on the evolution of SARS-CoV-1 and MERS, was “literally one in a million”.

Their presentation, which ­accused Chinese scientists of concealing the manufactured ­origins of Covid-19, came as US President Joe Biden met his Russian counterpart, Vladimir Putin, in Geneva, but the pair appeared not to discuss US and Australian demands for greater co-operation from China on a fresh ­inquiry into the origins of the virus.

“We brought this up but just briefly, in passing,” the Russian President said at his post-­summit press conference.

Last month, the US government ordered its intelligence agencies to conduct a 90-day ­inquiry into the origins of Covid following doubts about the quality of an inconclusive World Health Organisation report, ­tabled in March.

Dr Quay revealed Wuhan ­Institute scientist Shi Zhengli had herself published evidence in January 2020 that conceded the virus had emerged suddenly in humans. “But she realised the implications, because that sentence is no longer in (the final version of her) paper,” he said.

He said the WHO report had “censored” the earliest cases of Covid, which were found outside the Wuhan wet market. “This is not science, this is obfuscation,” Dr Quay added.

Professor Muller said there were concerns scientists would be “blacklisted and labelled an enemy of China” if they pursued the “lab leak” theory.

“That meant that China was exercising control over US freedom of speech. US scientists didn’t even want to discuss the issue for fear of what China would do. That is a very frightening conversation,” he said.

David Asher, a Hudson Institute senior fellow and former senior State Department official, said the two scientists were “among the top scientists globally who have actually tried to develop hard scientific proof for a lab leak”.


Hong Kong police arrest editor-in-chief of Apple Daily newspaper in raids

Ryan Law among five directors detained under national security legislation imposed by Beijing

Dozens of Hong Kong police officers gather at the offices of Apple Daily in Hong Kong on Thursday.
Hong Kong police arrest editor of Apple Daily newspaper – video

First published on Thu 17 Jun 2021 02.14 BST

Hong Kong’s national security police have arrested the editor-in-chief and four other directors of the Apple Daily newspaper in early morning raids involving hundreds of officers, over their role in the publication of dozens of articles alleged to be part of a conspiracy to collude with foreign forces.

The city’s security chief, John Lee, accused those arrested of using “journalistic work as a tool to endanger national security”, and issued a chilling warning to residents and other media.

“Normal journalists are different from these people,” Lee said. “Please keep a distance from them.”

The police force’s national security department said the five had been arrested on suspicion of collusion with a foreign country or with external elements to endanger national security, through articles which police said called for sanctions to be imposed on Hong Kong and mainland China. All were arrested at their homes, at around 7am.

Police also searched Apple Daily’s newsroom and its offices, saying the warrant covered “the power of searching and seizure of journalistic materials”. “The operation, still ongoing, aims at gathering evidence for a case of suspected contravention of the national security law,” it said.

Those arrested were named by Apple Daily as editor-in-chief, Ryan Law; the chief executive officer, Cheung Kim-hung; the chief operating officer, Chow Tat-kuen; the deputy chief editor, Chan Puiman; and the chief executive editor, Cheung Chi-wai.

Police also froze HK$18m (US $2.3m) in assets of three companies, Apple Daily Limited, Apple Daily Printing Limited and AD Internet Limited. Parent company, Next Digital, announced the suspension of trading in its shares before markets opened on Thursday.

The police operation is a significant escalation in the government’s moves to stifle Hong Kong’s press, of which the pro-democracy tabloid was widely considered to be a primary target.

Senior superintendent Steve Li Kwai-wah, the head of the police’s national security division, said there was “very strong evidence that the questionable articles played a very crucial part in the conspiracy, which provided ammunition for foreign countries, institutions and organisations to impose sanctions”, adding that those arrested played “a very important role” in their publication.

The articles reportedly date back to 2019. Authorities have made repeated assurances since the implementation of the controversial and wide-ranging national security law in June 2020 that it was not retroactive.

Li said the police valued freedom of the press. “We are not targeting the media, but only an organisation that is allegedly violating article 29 of the national security law.” He warned Apple Daily staff not to reoffend, and other journalists not to bring suspicion upon themselves, according to the Hong Kong Free Press.

In a press conference on Thursday afternoon, Lee issued a further warning to the city’s press to distance themselves from their Apple Daily colleagues.

“You should not collude with these perpetrators. Do not play cahoots with them, otherwise you will pay a hefty price. Distance yourself from them otherwise all you will be left with are regrets,” he said.

Hong Kong Apple Daily raid targeted 'conspiracy', claims security chief – video
Hong Kong Apple Daily raid targeted 'conspiracy', claims security chief – video

Lee refused to say what form the offending articles took – news reports or opinion – or to answer long-running concerns over how the national security law applies to media.

“Do your journalistic work as freely as you like in accordance with the law, provided you do not conspire or have any intention to break Hong Kong law, and certainly not the Hong Kong national security law,” he said.

The owner of the paper, pro-democracy campaigner and tycoon Jimmy Lai, has been in jail since late last year on charges relating to the 2019 protests and allegations of national security offences.

Apple Daily livestreamed the police raid on the office, which showed officers leading Law into the building, apparently with his hands tied behind his back. Most employees weren’t at work yet, but those there were moved to the building’s canteen on another floor, away from the search of the newsroom. The paper published a photo of a police officer searching through a reporter’s computer. Apple Daily said 38 journalists’ computers were seized.

Ryan Law, Apple Daily’s editor-in-chief, is taken away.
Ryan Law, Apple Daily’s editor-in-chief, is taken away. Photograph: AP

“This is the worst of times in Hong Kong,” said Apple Daily in an open letter to its readers. It said the city’s press freedom was “hanging by a thread”, but it vowed to stand tall and had “no regrets”.

The staff union said it was “enraged” by the arrests, and described the court decision to grant a warrant seizing journalistic materials as “regrettable”.

“As difficult as the circumstances may be, we will carry on with our jobs with the aim to publish our papers as normal tomorrow.”

Beijing’s Liaison Office in Hong Kong supported the arrests, saying: “Press freedom is not a shield for unlawful acts”.

Hong Kong security law being used to 'eliminate dissent' say US, UK, Australia and Canada Read more

The national security law was imposed by Beijing, with the Hong Kong government’s blessing, in June last year, and has since led to the arrests of more than 100 individuals, including 54 over the holding of democratic primary polls, an informal pre-election event often held by political parties of all stripes. Politicians and activists were among those arrested, and most were denied bail.

The UK foreign secretary, Dominic Raab, on Thursday said the raid showed authorities were using the law to target dissent rather than tackle public security. “Freedom of the press is one of the rights China promised to protect in the joint declaration [between the UK and China on Hong Kong governance] and should be respected,” he said.

Lai is among the most high-profile of those arrested under the law. He was charged a third time under the law in April, accused of foreign collusion in relation to activist Andy Li’s attempt to flee to Taiwan by boat last year. His assets were also frozen.

Lai has been a vocal opponent of the crackdown on the pro-democracy movement, and Apple Daily has produced extensive critical journalism. Hong Kong’s police commissioner has accused Apple Daily of creating hatred and dividing society, while pro-Beijing media has called for it to be shut down.

Thursday marked the second raid on its newsroom. Earlier this month, Law told Agence France-Presse he was facing “the greatest crisis since I took up the post over three years ago”.

The raids were condemned by journalism and human rights groupsSteven Butler, Asia program coordinator of the Committee to Protect Journalists, said the arrests destroyed “any remaining fiction that Hong Kong supports freedom of the press”.

“China, which controls Hong Kong, may be able to eliminate the paper, which it sees as an annoying critic, but only at a steep price to be paid by the people of Hong Kong, who had enjoyed decades of free access to information.”

Taiwan’s foreign minister, Joseph Wu, said he was “out of words to describe my anger and sadness”.

“Authoritarianism is waging a brutal war on Apple Daily, a desperately endangered symbol of freedom in Hong Kong.”

Wednesday, 16 June 2021


The Fed just got everyone’s attention with its abrupt change of tone

At its last meeting in April, US Federal Reserve Board chairman Jerome Powell indicated that the Fed was in no hurry to raise US interest rates. Now, it seems, it is thinking about it.

Confronted by data last week that core inflation is running at its highest level in nearly 30 years and an economy that is rebounding harder and faster than they had previously anticipated, the expectations of members of the Fed’s Open Market Committee (FOMC) have shifted markedly.

Where they were ultra-dovish at their last meeting they are now mildly hawkish, a shift in stance that caused the US sharemarket to slide, the US dollar to strengthen and bond yields to spike.

Wall Street slumped on the Fed’s release.

Wall Street slumped on the Fed’s release.CREDIT:AP

At the core of the markets’ abrupt change in mood, from complacency and a conviction that the Fed would keep US rates ultra-low indefinitely to unease, was the release of the FOMC members’ projections after this week’s meeting.

Where the median forecast for US real GDP growth at the last meeting was 6.5 per cent it is now 7 per cent; where the median forecast for inflation was 2.4 per cent it is now 3.4 per cent; where the projection for core inflation – the measure the Fed monitors most closely – was 2.2 per cent it is now 3 per cent.

Most significantly – although Powell downplayed it as a collection of individual opinions rather than an official Fed forecast – was the famous “dot plot” that captures the members’ expectations of future interest rates.

Where in March, and for the past year, a clear majority of members believed the Federal Funds rate would remain unchanged until 2024 there are now 13 of the 18 members who expect at least one rate rise before the end of 2023 and 11 who see at least two rate rises. Seven believe the move could come as early as next year.

There’s a famous quote attributed to John Maynard Keynes (there’s some dispute over whether he actually said it) that “when the facts change, I change my mind.”

The facts piling up before the FOMC are changing rapidly. Headline inflation is running at five per cent and core inflation at 3.8 per cent in an economy that has re-opened faster and more strongly than the Fed had anticipated, thanks partly to the impressive rate at which Americans are being vaccinated.

What the Fed and Powell had previously dismissed as a “transitory” phenomenon as the “base effects” of comparisons with last year’s pandemic-induced economic nadirs washed through the numbers now appears more elevated and persistent than previously thought.

At its last meeting in April, US Federal Reserve Board chairman Jerome Powell indicated that the Fed was in no hurry to raise US interest rates. Now, it seems, it is thinking about it.

At its last meeting in April, US Federal Reserve Board chairman Jerome Powell indicated that the Fed was in no hurry to raise US interest rates. Now, it seems, it is thinking about it.CREDIT:AP

While the surge in inflation is partly due to bottle-necks in supply chains that are struggling to respond to the speed at which the major economies have rebounded from last year’s brief recessions, there have also been unprecedented fiscal stimulus programs and, in the US, ambitious government spending plans, that have boosted activity, confidence and inflation.

Some of those influences on economic activity might be longer-lasting, and have a bigger impact on expectations of future inflation and therefore on consumer and corporate behaviours, than the Fed previously envisaged.

That’s not to say that the Fed has abandoned its view that the spikes in GDP and inflation are transitory – their projections for that data in 2022 and 2023 are largely unchanged from earlier meetings – but the transition to a post-pandemic normal might be more elongated than they previously thought.

The “stronger for longer” scenario flows through to the projections of an earlier-than-expected rise in interest rates and, perhaps, an earlier-than-expected start to the tapering of the Fed’s $US120 billion ($158 billion) a month of Treasury bond and mortgage purchases.

Those little tremors through financial markets as investors and traders digested the unexpected strength of the shift in the balance of the FOMC members’ thinking represent a realisation that the timelines for a shift in the ultra-loose US monetary policy settings don’t inevitably stretch out into the distant future but could move rapidly towards them.

Powell said the FOMC had started “talking about talking about” tapering the purchases at the meeting. The market expects him to provide something more concrete at the annual Jackson Hole conference in Wyoming in August.

Financial markets have, for much of the past decade – since the 2008 financial crisis and the introduction of quantitative easing (the purchases of bonds and other securities by central banks to keep rates at ultra-low, even negative, levels) in the US – operated on the basis of “QE Infinity,” or a conviction that the Fed would continue to pump liquidity into the system and maintain an ultra-low rate structure almost in perpetuity.

At even a hint that the Fed would start to taper its purchases in the past dramatic “taper tantrums” by investors and traders have forced it to retreat.

If the Fed is to start normalising US monetary policy, reducing its purchases and lifting rates, it will be a delicate and potentially combustible process.

Central banks have created enormous moral hazard in financial markets, leading to inflated values, potentially destabilising levels of risk-taking and purely speculative activity across most major – and some quite exotic asset classes.

They’ve also incentivised an extraordinary buildup of debt at almost every level of developed world economies while exacerbating wealth inequalities.

Powell has made it clear that, to try to avoid triggering market meltdowns, the Fed will give plenty of advance warnings of changes to its policy settings, although he also said on Wednesday that the Fed was in no rush to raise rates and that “whenever lift-off comes, policy will remain highly accommodative.”

“Lift-off” will be that moment, or series of moments, after the Fed has started to taper its QE program and begins to raise interest rates. Powell said it would be highly premature to start discussing lift-off now.

The Fed’s hand would be forced if the surge in inflation readings continues. Powell expects them to abate but has said the Fed won’t be deterred from acting by the threat of market turmoil if they don’t.

Those little tremors through financial markets as investors and traders digested the unexpected strength of the shift in the balance of the FOMC members’ thinking represent a realisation that the timelines for a shift in the ultra-loose US monetary policy settings don’t inevitably stretch out into the distant future but could move rapidly towards them.

From now on, every imminent release of inflation data is going to be anticipated nervously by market participants who now appreciate that the gentle and very extended scenario of gradual tapering of QE purchases and subsequent slow and modest increases in interest rates that was previously their worst-case scenario might be overtaken, rudely and (for them) even violently, by events.


China Is Quietly Stepping Up Its Interventions in Markets

Updated on 
  • Recent measures target commodities, currency, stock indexes
  • Party seeking to ensure financial stability in centenary year

China is resorting to increasingly forceful measures to contain risks to the financial system, in moves that threaten to undermine President Xi Jinping’s pledge to give markets greater freedom.

Authorities have in recent weeks ordered state firms to curb their overseas commodities exposure, forced domestic banks to hold more foreign currencies, considered a cap on thermal coal prices, censored searches for crypto exchanges and effectively banned brokers from publishing bullish equity-index targets. A new rule will bar cash management products from holding riskier securities and limit their use of leverage. On Thursday, an official said China plans to sell metals from state reserves.

While the measures fall short of direct intervention, they risk reinforcing the notion of moral hazard. If traders know authorities are likely to step in to limit gains or losses in an asset class, they can bet on that outcome with some certainty. The implied government backstop can encourage one-way bets -- a challenge for policy makers as they seek to make markets more efficient while supporting an imbalanced economic recovery.

“The problem for China is that there is more debt and more risks to the financial system, making it harder to give up control of domestic markets,” said Michael Pettis, a Beijing-based professor of finance at Peking University and author of Avoiding the Fall: China’s Economic Restructuring. “The more China stabilizes markets, the more fundamentally unstable they become because of moral hazard.”

China's stock benchmark heads toward support level

Easy monetary conditions abroad are exerting pressure on Beijing. Much of the liquidity unleashed by governments and central banks in the past 15 months has headed straight into China -- a huge market offering higher yields, a strong currency and increasingly better access for foreigners. One-sided capital controls mean prices can be skewed by too much money entering the mainland.

Officials have warned of asset bubbles on multiple occasions since January. Even before surging commodities started to stoke inflation risks, authorities had already encouraged a correction in stocks and cornered leveraged bond traders.

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The rhetoric intensified last week at a key forum in Shanghai, with the country’s chief banking and insurance regulator calling for “relentless” efforts to battle financial risks. Companies speculating in the currency are “doomed to lose,” said the head of China’s foreign-exchange watchdog. Investors should be wary of yuan depreciation risks as the dollar strengthens, said the China Foreign Exchange Committee in a Wednesday post.

“Policy makers are keenly monitoring financial stability risks,” Morgan Stanley economists including Jenny Zheng wrote in a June 10 note. “China’s Covid stimulus response was meaningful and effective in leading a recovery in the real economy, in contrast to a ‘flood-like stimulus’ approach in some developed markets which partly contributed to record-high asset prices.”

That doesn’t mean the Communist Party is abandoning efforts to reduce the state’s influence. Beijing’s silence on the future of China Huarong Asset Management Co. -- a bad-debt manager deeply entwined in the nation’s banking system -- has shocked investors and challenged long-held assumptions that the government will always bail out systemically important firms to maintain stability.

The notion of “too big to fail” may no longer apply to Chinese borrowers, according to Goldman Sachs Group Inc. analysts.

For more on Chinese financial markets
Daniel Moss

India vs. Brazil. One of Them Has to Be Right on Inflation

Both countries have been crippled by Covid-19 and beset by surging prices, but they’re taking opposite approaches on monetary policy.

Tim Culpan