Exclusive-France proposes Hezbollah withdrawal, border talks for Israel-Lebanon truce

Exclusive-France proposes Hezbollah withdrawal, border talks for Israel-Lebanon truce.....»»

Category: topSource: yahooFeb 13th, 2024

The Geopolitics Of World War III

The Geopolitics Of World War III Authored by Michael Hochberg & Leonard Hochberg via, Introduction On January 2, 2024, Foreign Minister Israel Katz proclaimed “We’re in the middle of World War III against Iran [led] radical Islam, whose tentacles are already in Europe.”   He claimed that Israel, in engaging in a war against Hamas and other Iranian proxies, was defending “everyone.” Although his rhetoric may seem overblown to many in the United States and Europe, it should not be dismissed out of hand.  Sometimes, regional conflicts, such as the Japanese conquest of Manchuria of 1931-32 or the Spanish Civil War of 1936-39, foreshadow dangers that are more geographically extensive and militarily intense.  Do the barbaric events of October 7, 2023, and the Israeli military campaign in Gaza prefigure a broader, global armed conflict?  Or is this merely a local conflict, one that is likely unresolvable short of one side or the other engaging in genocide or ethnic cleansing?  We have written this paper in a specific context. Over thirty months ago we made a geopolitical prediction regarding the emergence of a global conflict with four fronts.  However, social scientists rarely test their theories by predicting future political events.  Who wants to be characterized as a Jonah or a Cassandra?  As one eminent strategist argued, the future of war (in detail) is unknowable.  And, with perhaps one notable exception, social scientists rarely engage, on a routine basis, in disprovable prediction.  Without predictive tools, social scientists and strategists must rely on intuition, a knowledge of history, and good theories—all of which are often in short supply. A Four-Front Global War? On the anniversary of D-day, June 6, 2021, The Hill posted our paper, “Could the United States Fight a Four Front War? Not Today.”  We predicted that several autocratic powers would launch “simultaneous challenges” designed to diminish the power and influence of the United States.  These seemingly distinct conflicts, when viewed from the perspective of Halford Mackinder’s Heartland thesis, should be perceived as separate fronts of a single war by autocratic, territorial powers – either in close cooperation or piggybacking on one or another’s challenge to the established order – on the dominance of the United States and its maritime partners and allies situated along the Eurasian littoral.  We argued that the United States should rebuild its naval capacity, and by implication its military industrial capacity more generally.  Specifically, we wrote: “If we are to avoid a multi-front war, the United States must be ready to fight and win conventional conflicts in several places simultaneously and must invest in strengthening our allies’ ability to defend themselves.” Written on the eve of the withdrawal from Afghanistan, August 31, 2021, our paper suggested that Vladimir Putin’s Russia might once again attack Ukraine to complete the conquest it had initiated in 2014 and thereby dominate the northern littoral of the Black Sea from Crimea to Moldova. To wit: Russia continues to threaten Ukraine, aiming to consolidate its conquest of Crimea. When Ukraine surrendered its nuclear arms, the U.S. guaranteed Ukrainian territorial integrity in the 1994 Budapest Memorandum. Russia has eloquently demonstrated the low value of such guarantees. Regarding Iran, we argued that: Rogue autocratic regimes are a growing threat. Iran sponsors Houthi rebels in Yemen, stokes Shi’ite discontent in the Gulf States and Iraq, dominates Lebanon and Syria through Hezbollah, and threatens shipping through the Gulf of Hormuz. Iran, through its many proxies throughout the Middle East, would seek to dominate the region and instigate further attacks by Hamas on Israel.  Communist China, a new peer adversary for the United States, would be tempted to pile on, seeking to reunify Taiwan with the Mainland as a preliminary to securing control over the South China and East China Seas: Chinese leader Xi Jinping has declared that Taiwan will be incorporated into China, by force if necessary. China is building a capacity to invade or blockade Taiwan, threatening U.S. reliance on Taiwan for advanced electronics, semiconductors, and as a port to contain Chinese ambitions in the Pacific. Our intuition suggested that the current administration was squandering a key strategic asset, specifically the deterrence required to cause leaders of autocracies across Eurasia to refrain from testing the resolve of the United States.  More recently, we introduced the concept of ‘distributed deterrence’ as a strategy that the United States could leverage to generate more effective deterrence both quickly and inexpensively. We offered these predictions in the hope that Western policy makers would strengthen the defenses of our allies in Ukraine, Israel, and Taiwan, and that as a result, deterrence would win the day.  In effect, we were hoping to be proven wrong, as policy makers considered the dangers of a multi-front war in their planning.  Unfortunately, events have begun to unfold as we predicted, because the United States did not act in a timely way to adequately reinforce, train, and support our allies. Taking Stock After 30 months, we believe it is now necessary to take stock of our prediction.  To do so is not merely to provide a checklist of what we got right or wrong, but more significantly to offer an assessment of how our understanding of the strategic history of Eurasian autocracies led to these predictions. The Ukraine Front The 2014 Russian attack on Ukraine resulted in the conquest of Donbas – a territory along the eastern Ukrainian border with Russia – and the Crimea.  These areas were inhabited largely by ethnic Russians and Russian speakers, though some of them certainly had no desire to be ruled from Moscow.  Putin justified this attack as a response to Ukraine’s assault on a population that wished to remain Russian, in a cultural, linguistic, and ethnic sense.  The Russian failure to capture a land bridge to Crimea from its conquests in Donbas strongly suggested that another campaign would have to be launched to consolidate territory, provide another supply route to Crimea, and forestall a Ukrainian bid to enter the EU and NATO (here, here, here, and here).  After Russia renewed its war in Ukraine on February 22, 2022, many Western pundits began to speculate on how this second phase would end.  The Russian drive on Kiev, designed to conquer the Ukraine capital, stalled, and then was turned back.  Ukraine forces launched successful counter attacks in the east and south, reconquering some lost territory and fueling a sense that a Ukrainian victory might soon be possible.  Meanwhile, as the United States became more committed to the Ukraine cause, few commentators offered an assessment of what the United States should seek as an outcome in line with its own interests, and what means should be deployed in order to generate such an outcome.  We indicated that there were essentially three geostrategic outcomes (here, here, and here) that should be considered: Sell out Ukraine to turn Russia from an ally of China into a client of the United States, secure a rapid Ukraine victory that would reinforce the international rules based order, or allow a stalemate to emerge that would grind down the Russian military machine.  After explaining the pros and cons for each, we argued that the most desirable outcome, from an American strategic perspective, was a rapid Ukrainian victory that would result in Ukraine retaking both the Russian naval base in Sevastopol and the Crimean bridgehead.  Regardless of the feasibility of reconquering Crimea, the destruction of the Russian Black Sea fleet is highly desirable. To achieve this goal, the United States had to quickly supply Ukraine with advanced conventional military equipment, including long range missiles that would enable Ukraine’s forces to attack not only the logistics centers deep in Russian territory but also the Russian Navy.  Instead, the Biden administration has released ever more advanced equipment, haltingly and in dribs and drabs, which did not permit the Ukrainian troops to expel Russian forces from Donbas.  What weapons were provided were in many cases deliberately crippled so that they could not be used against Russian territory.  Extensive public discussions have preceded the delivery of advanced weapons systems, which has made it impossible for the Ukrainians to achieve surprise.   Instead of a rapid Ukrainian advance, the current position is one of stalemate, with trial balloons being released for diplomacy (here, here, and here) to restore (a faux) peace to Ukraine.  Initiating talks with Putin at this moment, when he has mobilized more manpower and is negotiating the purchase of weapons from Iran and China, signals Western weakness while emboldening enemies of the United States and disheartening Western allies across Eurasia.  With a significantly larger economy and population base than Ukraine, and with the ability to operate from a geographic shelter where they cannot be attacked, Russia has marked advantages in a long-war scenario.  If Russian propaganda and Western impatience can undermine Western popular support for Ukraine, even maintaining the current stalemate may become impracticable for the Ukrainians.  A steady and assured flow of Western support, including the provision of advanced systems is a necessity for the continued viability of the Ukrainian war effort.  Hamas-Israel Front Israel, the United States’ foremost ally in the Middle East, has once again come under attack by Hamas.  In a recent post, we argue that Hamas attacked Israel on the behalf of Iran to derail the Abraham Accords between Israel and the Arabic Muslim countries including, most notably, an upcoming negotiation with Saudi Arabia.  Such was the short-term occasion for the attack; over the medium run, Iran had engaged in a geostrategy of proxy encirclement, at two different scales: the local encirclement of Israel and a wider regional encirclement of Saudi Arabia. Across the Middle East, Saudi Arabia faces adversaries: Iran and its clients and proxies across the Fertile Crescent – that is the lands from Iraq, through Syria, and on to the eastern Mediterranean coast in Lebanon – and in Yemen, to the south of Saudi Arabia, where the Houthis have launched rockets attacking Saudi pipelines.  Furthermore, Iran has become deeply involved in the civil war in Sudan and has cooperated extensively with Qatar.  Both are major supporters of Hamas, and Iran backed Qatar during the crisis in Qatari relations with Saudi Arabia in 2017.   In addition to this geographically extensive encirclement of Saudi Arabia, there is ongoing effort to encircle Israel: To the North, Iranian proxies in Lebanon (i.e., Hezbollah) and, across the Golan Heights, the client state of Alawite Syria; to the east, the Palestinians in the territories of Jordan and the Palestinian Authority; in Israel, the Arab Israelis as a potential fifth column; and, to the west, in Gaza, the terror group, Hamas.  An Israeli tie to Saudi Arabia would have provided Israel with legitimacy in the Arab Muslim world and, should the Iranians launch an attack on Saudi Arabia or Israel, shared intelligence, technology, and expertise could have contributed to mutual defense.  For the foreseeable future, while the war in Gaza continues, negotiations between Israel and Saudi Arabia are unlikely to yield any public results. Prime Minister Benjamin Netanyahu and his war cabinet recognized in the aftermath of the slaughter of October 7, 2023 that Hamas and Gazan civilians were inspired by a culture of hatred to commit acts of barbarism (here, here, and here) – rape, beheadings, mutilation, kidnappings, etc. – previously deployed by the Islamic State of Iraq and Syria. To respond to this attack along the Gaza frontier, and to cope with the threats emerging on the northern border, on the Golan, and in the West Bank, Israel called up 300,000 reservists.  As of October 8, 2023, Israel’s standing army numbered 169,500, with the reserves numbering 465,000.  This call-up has deleterious economic consequences:  According to the Times of India, “JPMorgan Chase & Co. predicts that Israel's economy may shrink 11% on an annualized basis in the last three months of the year due to the ongoing conflict with Hamas.”  The longer this war goes on, the greater the economic disruption.  The longer the desired political and military outcome, eliminating Hamas in Gaza, remains in doubt, the greater the likelihood that Hezbollah and other Iranian proxies will enter the fray in a significant fashion.  For Israel, deterrence, once lost in Gaza, must be forcefully and unambiguously restored, or its many regional enemies, including the Palestinians on the West Bank and potentially Muslims in Israel itself, may be inspired to launch intifadas, insurrections, and attacks.  For Israel, the attack on 10/7 and its aftermath presented an existential threat, because it altered regional perceptions of the competence of the IDF (contra here). The Attack on International Shipping In our prediction, we suggested that the Iranian regime would once again disrupt maritime commerce by attacking international shipping that passed through the Strait of Hormuz.  On January 11, 2024, Iran announced the seizure of a Greek-owned oil tanker in the Gulf of Oman, the waterway leading to the Strait of Hormuz.  It is too soon to tell if this event is a one-off or the opening of a campaign.  However, we did not perceive that the Iranians would prompt the Houthis to disrupt maritime commerce in the Bab al-Mandab, the strait connecting the Indian Ocean and the Mediterranean Sea via the Red Sea and the Suez Canal.  The Iranians have allegedly supplied the Houthis with advanced weaponry – missiles and unmanned aerial vehicles – for attacking Saudi pipelines and international shipping.  Although the Houthis’ claim to be attacking Israeli shipping in response to the Gaza war, the fact that most of the ships that have been attacked are owned by non-Israeli nationals and are not traveling to or from Israel suggests that these attacks are part of an ongoing Iranian effort to disrupt flows of commerce passing through the Middle East.  Such attacks are particularly harmful to the Egyptian regime, which derives an outsized portion of their revenues from canal fees and associated activity.  Identifying the geographic particular, the disruption at the Bab al-Mandab instead of at the Strait of Hormuz, proved elusive; however, we anticipated the Iranian intention.  Why did the Iranians turn to the Houthi proxy?  The Iranians may have become more risk averse, acting indirectly through the Houthis; attacks through proxies are less likely to generate repercussions or counterattacks at home, as they are deniable.  Meanwhile Iranian proxies are also engaged in repeatedly attacking U.S. outposts and military bases in Iraq and Syria, and most egregiously the U.S. embassy in Baghdad.  Iran has also issued a threat to attack shipping passing through the Strait of Gibraltar, presumably by mobilizing another proxy in Morocco.  Such geostrategic darts, for want of a better word, thrown at the United States and maritime commerce have demonstrated Iranian opposition to the Israeli war in Gaza and an intent to compromise the passage of shipping over the high seas.  It is unclear whether Iran’s leaders seek to drive the United States out of the Middle East, or whether they intend to draw the United States into a series of local counterinsurgencies against Iranian proxies, which would give Iran immense negotiating leverage. As of the writing of this essay, these attacks at the Bab al-Mandab have led the United States and the United Kingdom to attack the Houthis, but the maritime coalition has not, as yet, used military force against Iranian interests or facilities to reestablish deterrence with regard to the sponsors of these proxy attacks.  Certainly, these attacks serve to increase open-market prices for oil and gas; this helps Russian economic prospects.  Also, China is likely paying fixed prices for sanctioned Iranian oil coming through the Straits of Hormuz; this likely helps explain why the Red Sea is being closed (to all but Chinese and Russian aligned shipping) but Hormuz has thus far remained open. What is of utmost importance here is this: the earlier a prediction, the more difficult it is to specify the date and location of any adversarial event, particularly a military attack.  The fact that the Iranians have instigated attacks by Houthis at the Bab al Mandab instead of launching a campaign at Hormuz is less important than having correctly predicted Iran’s intentions amid a multi-front war.  We advanced the claim that the Iranians would once again disrupt international shipping, which they have done through a proxy.  Attacks at any major maritime choke point have consequences for supply chains across the world economy.     China and the Taiwan Front The jury is still out regarding a final geopolitical prediction:  Will Communist China resort to armed force to integrate Taiwan?  Recently, the Chinese regime has sent war ships into the seas near Taiwan to demonstrate a capacity to blockade that island.  In addition, Chinese fighter jets have tested Taiwanese aerial defenses, prompting Defense Minister Chiu Kuo-cheng to state, in October of 2022, that “[We] will view any crossing of aerial entities (into Taiwan’s territorial airspace) as a first strike.”  Kuo-cheng subsequently threatened to respond with force.  CNN recently reported that President Xi Jinping told President Joe Biden, during their summit held near San Francisco on November 15, 2023, that “China’s preference was for peaceful reunification and laid out conditions under which use of force would be utilized.”  CNN failed to report on those conditions or may not have been privy to the specifics; nevertheless, CNN also reported that an unnamed U.S. official indicated that, when Biden suggested that “peace and stability” were U.S. goals for the region, “President Xi responded: Look, peace is all well and good, but at some point we need to move towards resolution more generally[.]” In the run up to the recent election in Taiwan, Beijing urged voters to choose “peace over war.”  The candidate who Beijing perceived as advocating for Taiwanese independence won, and now Xi may believe that China has to make good on the many threats (here, here, here, here, and here) issued regarding the Taiwan issue. Such threats should not be ignored; rather, they must be understood as occurring during an ongoing confrontation with the United States, one that could erupt into another front in a global war should the United States continue dealing ineffectively with the seemingly separate conflicts in Ukraine, the Levant, and at the Bab al-Mandab.  As our prediction indicated, the greater the number of fronts in this emerging global conflict, the more difficult it will be for the United States to prioritize where to send depleted treasure – due in part to the rising national debt – and scarce weaponry – due in part to the failure to maintain an adequate industrial base to produce military hardware.  Four Fronts, One War At this point, the Russo-Ukraine war, Hamas’ attack on Israel and the Israeli response, the Houthis’ war against international shipping, and the 100 or more Iranian proxy attacks on American outposts in the Middle East would all suggest that a multifront war has been launched.   Was this multi-front war coordinated, sequenced, or merely the result of opportunism?  Historians may one day be able to make a definitive determination.  For purposes of figuring out what to do next, this is a distinction without a difference: The perception among the enemies of the West is that the present moment is one in which they have an opportunity to exploit Western distraction and weakness.  What is known now is this: Russia, Iran and China have signed a series of bilateral economic agreements rendering their economies, including weapons acquisitions, more interdependent (here, here, here, here and here).  Such economic understandings often undergird emerging alliances.  For further evidence that the prediction of four fronts is in fact one war, consider the following mutually reinforcing consequences.  The shipments of Ukrainian exports through the Suez Canal have fallen off since the Houthis compromised transport that passes through the Bab al Mandab.  Ukraine’s financial ability to prosecute its war against Russia is thus being impaired.  Russian and Chinese freighters have reportedly been given a free pass through the Red Sea by the Houthis (here), a preferential policy conferring a time and distance advantage over competitors who, to avoid the war zone, transport their cargoes round the Cape of Good Hope to European markets.  Meanwhile, Russian Defense Ministry has reportedly announced a soon-to-be-signed, anti-American, and pro-multipolar pact with Iran.  Meanwhile, the delivery of U.S. military hardware to Ukraine and Israel reduces available equipment for Taiwan. Will Xi Jinping take advantage of America’s lack of preparedness for a multifront war across the Eurasian rimland?  For our prediction of a four-front war to be fully realized, Communist China would have to blockade or attack Taiwan even as these other conflicts take place, or in their immediate aftermath – once it becomes apparent that the United States lacks the will and/or the capability to respond effectively to yet another threat to the existing order.  At some point, these separate fronts may be perceived as a single world-wide war, though not, as the Israeli Foreign Minister claimed, a world war between the West and radical Islam.  Instead, this world-wide four-front war should be perceived as Eurasian land-power autocracies attacking maritime democracies and their allies, led by the United States.  Geopolitical Theory of the Heartland Beyond an intuition born of having read strategic history, what theory informs our understanding of strategic history and the relevant geography?  We rely on geopolitical theory, most notably Halford Mackinder’s theory of the Heartland, to assess the trajectory of events across Eurasia.  Despite differences across Mackinder’s three geopolitical statements (1904, 1919, and 1943), the essential feature of his geopolitical theory is this: With the completion of the Trans-Siberian Railroad, the economic isolation imposed on interior Eurasian settlements by virtue of the cost of overland transportation had come to an end.  Until that moment, a vast stretch of territory reaching from the Arctic in the north to the Iranian plateau in the south, from the Lena, Indigirka, and Kolyma River basins in the east and beyond Moscow to the west, was characterized by a shared geographic feature: the rivers in this area flowed north to the frozen Arctic Ocean or south to land-locked seas such as the Caspian Sea.  As a result of this landlocked situation, naval power, exercised by Great Britain or other seafaring nations, had little if any military impact on the course of events in the region Mackinder labeled ‘the Heartland.’  But with the completion of the Railway, Tsarist Russia – and later the Union of Soviet Socialist Republics – alone or in an alliance with European or Asian powers, might profoundly influence the course of global events due to access to new sources of minerals, the presence of virgin soil, and demographic expansion.  Ultimately, interior lines of transport and communication for the movement of armies overland across the expanse of the Heartland would enable whichever power occupied the Heartland to project power westward to the European Coastlands, southwestward to Arabia, and south and eastward into the Monsoon Coastland – three of the six natural regions of Eurasia (here and here). Even more critical was Mackinder’s recognition that World War I led to a potential reshaping of the Heartland as one of these natural regions.  Mackinder posited that the region he labeled the “Strategic Heartland” included contested seas and river basins, as well as land routes suitable for invasion.  Hence, the Strategic Heartland encompassed the natural Heartland, and in Europe, it extended to the Danube Basin, the Black Sea littoral, the eastern stretches of the Northern European Plain, and the Baltic Sea littoral.  For Mackinder, the maritime outposts of naval power, the Black and Baltic Seas, might be turned into “lakes,” should the power occupying the Heartland capture a sea’s littoral through the successful domination by land power.  Learning From Geopolitical Theory We learned three lessons from Mackinder’s geopolitical theory.  First, Mackinder’s argument pertaining to the Baltic and Black Seas revealed that threatening or capturing the maritime chokepoints near the Bosporus and Dardanelles or the Kattegat and Skagerrak – the straits north of Denmark connecting the Baltic to the North Sea – was essential to controlling these seas.  By way of a geographic analogy, Mackinder’s theory enables the observer of geopolitics to appreciate how control over the Strait of Hormuz and the Bab al-Mandab compromises freedom of the seas in the Persian Gulf and the Red Sea approach to the Suez Canal and may eventually lead to control over the relevant coastlines.  However, modern missile technology requires only proximity to a strategic strait or narrow body of water for sea denial to be effective against commercial shipping (here). Second, Mackinder’s 1920 Report on the situation in South Russia during the Bolshevik Revolution revealed the strategic importance of Ukraine’s territory.  A major invasion into the Russian cultural and demographic core around Moscow was launched north from Ukraine by the White Russian forces.  In addition, one glance at a “strategic map” of Europe, viewed from high above the Urals, reveals not only the importance of the Northern European plain as an invasion route into Russia but also the southern invasion route from the Crimea.  Before the recent outbreak of war, the United States allegedly began modernizing a Ukrainian naval base located east of Odessa  to accommodate larger warships.  Russian geostrategic planners must consider threats from both directions, particularly if the Baltics and Ukraine are aligned with what they consider to be an adversary.  For restoring the Russian empire and reestablishing Russian status as a great power, the conquest and incorporation of Ukraine is perceived as critical.  Russia seeks to dominate Ukraine for its manpower, its on-shore mineral and off-shore hydrocarbon deposits, its industrial base, its agricultural productivity, and its strategic location.  In geo-economic terms, the ongoing division of the world-economy into a sphere of maritime and the land-based Eurasian territorial powers puts Ukraine in the cross hairs. Third, America, as the recent holder of the baton of thalassocracy, failed to forestall the formation of a proto alliance of the Heartland Power, Russia, with two powers that straddle the Heartland and the maritime rim, Iran, and China.  In Democratic Ideals and Reality (1919), Mackinder warned of the danger of the Heartland Power gaining control over the Baltic and Black seas and then, at some future date, securing power over Eurasia and Africa: What if the Great Continent, the whole World-Island [i.e., Eurasia and Africa] or a large part of it, were at some future time to become a single and united base of sea-power?  Would not the other insular bases be outbuilt as regards ships and outmanned as regards seamen?  Their fleets would no doubt fight with all the heroism begotten of their histories, but the end would be fated. Mackinder feared that the Heartland Power, alone or in alliance with powers controlling portions of the maritime rim of Eurasia, might go to sea, and become an amphibious power.  Currently, in Ukraine, Russia seeks to reassert control over the northern Black Sea littoral, from Crimea to Moldova, thereby gaining control over the offshore hydrocarbons (here).  China and Iran, with their long coastlines, have decided to become amphibious powers while developing and deploying drones and land-based anti-ship missiles for sea control and denial.  Iran makes modern weapons systems for their Houthi proxies.  China threatens to reintegrate Taiwan, by force, if necessary, perhaps by blockade, even as it asserts exclusive control over the passage of shipping and offshore hydrocarbon deposits in the South China Sea. NOW WHAT? What of the near future?  Will there be any further challenges to the United States?  Venezuela placed a referendum in front of its citizenry questioning whether contested territory currently held by Guyana should be reincorporated into Venezuelan territory.  The response was in favor of reincorporation, with Venezuela reportedly mobilizing contingents of its military.  Guyana and Brazil have responded.  A nuclear armed North Korea continues to issue threats in response to alleged American and South Korean provocations.  The Russian regime has imperial ambitions beyond Ukraine.  Should Putin or his successor believe that the conquest of the Baltic States is achievable, it will certainly be attempted.  And there is a final point grounded in a comparative geopolitical speculation: In addition to compromising passage through Bab al-Mandab and the Strait of Hormuz, and the threat to shipping via the Strait of Gibraltar, Iran or another power may mobilize a proxy near another maritime choke point – the Strait of Malacca.  Certainly, the autocracies of the world are engaged in gray-zone warfare aimed at undermining Western support for Israel and Ukraine and aimed at mobilizing political extremists of all stripes.  With the very large number of Muslim immigrants in Western Europe, any instability in the Middle East can easily produce crippling riots and insurgent or terrorist activity, especially with financial and logistical support from Iran and other regional powers.  Western leaders are beginning to recognize that weakness in dealing with the threats that are already on the table will prompt new challenges in new locations (here and here). Despite these ominous developments, the United States and its allies have generated one significant success and several potential successes in their attempt to thwart the designs of these autocratic Heartland regimes.  In response to the war in Ukraine, Finland has joined NATO and Sweden’s accession has recently been approved by a parliamentary committee in Turkey (though not yet by the Turkish state).  The anticipated consequence is to turn the Baltic Sea, but for the Russian naval base at Kaliningrad and St. Petersburg, into a NATO dominated lake.  In addition, should Ukraine manage to reverse Russian territorial conquests, secure its independence from Russia, and then join NATO and the EU, these events would represent an extension of European power.  Meanwhile, Ukraine has had great success in driving the Russian Black Sea Fleet out of Crimea and into home ports further from Ukrainian missile launching sites; we have argued that before the war is over, the Ukrainians should be furnished with the means to sink the remainder of the fleet and destroy the shipyards.  Ukrainian successes in attacking the Black Sea fleet have led the Russians to consider building a naval base in Ochamchire, Georgia.   In the Middle East and Arabia, the United States almost succeeded in fostering an extension of the Abraham Accords to include Saudi Arabia.  Finally, the Quadrilateral Security Dialogue (“Quad”) is a potential maritime alliance of India, Australia, Japan, and the United States that may, in the coming years, act to secure the free passage of shipping in the South China Sea and defend Taiwan.  In short, across the maritime rim of Eurasia, the United States is slowly mobilizing partners and allies that are threatened by the revisionist and revanchist regimes of the Heartland. Conclusion: Strategy and the Geopolitical Advantage Our horrifying prediction, which may yet be fully realized, of a four-front war was made by attending to geopolitical theory, strategic history, and an intuition for how events might unfold.  Regardless of whether China undertakes kinetic action against Taiwan, the United States and our allies now need to rush preparations for such a war at the highest possible priority.  As we pointed out in the earlier article, being ready to fight a global, multi-front war is the only way to avert one. Geopolitics provides the observer of international relations with several advantages.  First, it is an interdisciplinary and integrative field of study that aims to capture aspects of reality that impinge on the evolution of international crises.  Second, it juxtaposes persistent geographic structures, such as landed and maritime locations and activities, with trends and events, placing the ephemeral in the context of the enduring (here).  Third, geography and geopolitics deploy particularizing and generalizing methods to understand the relationships of places to spaces, locations to regions, and nation-states to the international system.  Fourth, geopolitics uses maps, including those generated by geographic information systems, to develop an appreciation of how states transform terrain into more favorable environments for the projection of power amid adversarial relationships, both potential and realized.  Geopolitics is as old an approach to international conflict as Thucydides, Sun Tse, and Kautilya.   It may be that geopolitical analysis, if properly deployed, gives insight reminiscent of Galadriel’s Mirror, “For it shows things that were, and things that are, and things that yet may be.” However, despite the advantages offered by geopolitical thought for the development of strategy, Mackinder is explicit (here): “Democracy refuses to think strategically unless and until compelled to do so for purposes of defense.” After at least a generation, now is the moment for Americans to once again use geopolitics to formulate strategy. *  *  * Acknowledgements:  The authors thank the speakers and participants in the Mackinder Forum seminars and lectures for sharing their insights.  Professors Brian Blouet, Athanasios Platias, Geoffrey Sloan, and Paul Rahe commented on an earlier draft of this paper.  We are grateful for their thoughtful suggestions.  Errors and misinterpretations remain ours. Michael Hochberg earned his PhD in Applied Physics from Caltech and is currently a visiting scholar at the Centre for Geopolitics at Cambridge University.  He is the President of Periplous LLC, which provides advisory services on strategy, technology, and organization design.  He co-founded four companies, representing an exit value over a billion dollars in aggregate, spent some time as a tenured professor, and started the world’s first silicon photonics foundry service.  He co-authored a widely used textbook on silicon photonics and has published work in Science, Nature, National Review, The Hill, American Spectator, RealClearDefense, Fast Company, Naval War College Review, etc. Leonard Hochberg taught at Stanford University (among other institutions), was appointed a Fellow at the Hoover Institution, and co-founded Strategic Forecasting, Inc. (i.e., STRATFOR).  He has published in Social Science History, The Journal of Interdisciplinary History, National Review, The Hill, American Spectator, RealClearDefense, Naval War College Review, Orbis, etc.   Len Hochberg earned his PhD in political theory and European history at Cornell University.  He is a Senior Fellow at the Foreign Policy Research Institute and serves as the Coordinator of the Mackinder Forum-U.S. Views expressed in this article are opinions of the author and do not necessarily reflect the views of ZeroHedge. Tyler Durden Thu, 02/08/2024 - 23:45.....»»

Category: dealsSource: nytFeb 9th, 2024

Arab Leaders Offer Syria Billions In Aid, Sanctions Relief If Assad Pushes Back Against Iran

Arab Leaders Offer Syria Billions In Aid, Sanctions Relief If Assad Pushes Back Against Iran Via The Canary, Arab leaders are offering Syrian President Bashar al-Assad a deal that includes billions of dollars for reconstruction efforts and a pledge to lobby the west to lift sanctions in exchange for "[asking] Iran to stop expanding its footprint in the nation," according to Arab and European officials that spoke with the Wall Street Journal. Other conditions set by the leaders of the unnamed Arab nations include a pledge from Damascus to engage with opposition and rebel groups, accept Arab troops to "protect returning refugees," and crack down on the captagon drug trade. Image: SANA via AP The secret talks reportedly gained momentum following the devastating earthquakes that struck Turkiye and Syria last month, killing 6,000 in the Levantine nation alone. Nonetheless, a Syrian government adviser told the WSJ that Assad "has shown no interest in political reform or a willingness to welcome Arab troops." Western powers have also made little effort to lift crushing sanctions or stop politicizing humanitarian aid deliveries. Last month, US State Department spokesman Ned Price urged the international community not to let humanitarian assistance to Syria be accompanied by normalization, stressing: "[Washington’s] position on the Assad regime has not changed." The talks between Damascus and Arab leaders are reportedly backed by Saudi Arabia, which recently agreed to restore ties with Iran in a China-brokered deal. In recent weeks, Saudi officials have called for an end to the isolation of Syria to allow a response to its dire humanitarian crisis. "There is a consensus building in the Arab world that the status quo is not tenable. And that means we have to find a way to move beyond that status quo," Saudi Foreign Minister Prince Faisal bin Farhan Al Saud said earlier this month. European and Arab officials also confirmed to the WSJ that Syria’s regional reintegration would be high on the agenda at the next Arab League summit, set to be held later this year in Saudi Arabia. In recent weeks, Jordan and Egypt sent their foreign ministers to Damascus for their first diplomatic visits since the war erupted in 2011. Cairo in particular is spearheading a reconciliation plan which proposes restoring relations between Syria and Arab states to pre-2011 levels, returning Syria to the League of Arab States, and negotiating the deployment of joint "Arab forces" on the Syrian-Iraqi border, according to exclusive information made available to The Cradle. Dana Stroul, who spoke as co-chair of the Syria Study Group in 2019, acknowledged that the U.S. voted to keep its troops in Syria to secure "resource-rich" areas and to achieve an outcome that would "advance and protect" U.S. interests. — In Context (@incontextmedia) March 12, 2023 Other Arab nations responsible for fueling the war in its early stages, such as Tunisia,  have announced plans to restore diplomatic ties. Even before the earthquake hit, Arab nations had slowly started to rebuild ties with Syria after more than a decade of war and isolation, citing the failure of the US-sponsored war and concerns about Iran’s growing presence in the country. Despite these concerns, Iran has welcomed progress between Syria and the Arab world. Iranian Foreign Ministry spokesman Nasser Kanaani called it "a realistic approach" and "a positive step toward Islamic solidarity." Damascus has repeatedly denied "inaccurate reports about Iranian military forces in Syria" and asserts that "the number of Iranian advisors in Syria does not exceed 100." Tyler Durden Sat, 03/18/2023 - 19:30.....»»

Category: blogSource: zerohedgeMar 18th, 2023

How The "Grand Chessboard" Led To US Checkmate In Afghanistan

How The "Grand Chessboard" Led To US Checkmate In Afghanistan Authored by Max Parry via, Nearly as suspenseful as the Taliban’s meteoric return to power after the final withdrawal of American armed forces from Afghanistan is the uncertainty over what will come next amid the fallout... Many have predicted that Russia and China will step in to fill the power vacuum and convince the facelift Taliban to negotiate a power-sharing agreement in exchange for political and economic support, while others fear a descent into civil war is inevitable. Although Moscow and Beijing potentially stand to gain from the humiliating US retreat by pushing for an inclusive government in Kabul, the rebranded Pashtun-based group must first be removed as a designated terrorist organization. Neither wants to see Afghanistan worsen as a hotbed of jihad, as Islamist separatism already previously plagued Russia in the Caucasus and China is still in the midst of an ongoing ethnic conflict in Xinjiang with Uyghur Muslim secessionists and the Al Qaeda-linked Turkestan Islamic Party. At this point everyone recognizes the more serious extremist threat lies not with the Taliban but the emergence of ISIS Khorasan or ISIS-K, the Islamic State affiliate blamed for several recent terror attacks including the August 26th bombings at Hamid Karzai International Airport in the Afghan capital which killed 13 American service members and more than a 100 Afghans during the US drawdown. Three days later, American commanders ordered a retaliatory drone strike targeting a vehicle which they claimed was en route to detonate a suicide bomb at the same Kabul airport. For several days, the Pentagon falsely maintained that the aerial assault successfully took out two ISIS-K militants and a servile corporate media parroted these assertions unquestioningly, including concocting a totally fictitious report that the blast consisted of “secondary explosions” from devices already inside the car intended for use in an act of terror. Two weeks later, US Central Command (CENTCOM) was forced to apologize and admit the strike was indeed a “tragic mistake” which errantly killed ten innocent civilians — all of whom were members of a single family including seven children — while no Daesh members were among the dead. This distortion circulated in collusion between the endless war machine and the media is perhaps only eclipsed by the alleged Russian-Taliban bounty program story in its deceitfulness. If any Americans were aware of ISIS-K prior to the botched Kabul airstrike, they likely recall when former US President Donald Trump authorized the unprecedented use of a Massive Ordnance Air Blast bomb, informally referred to as the “Mother Of All Bombs”, on Islamic State militants in Nangarhar Province back in 2017. Reportedly, Biden’s predecessor had to be shown photos from the 1970s of Afghan girls wearing miniskirts by his National Security Advisor, HR McMaster, to renege on his campaign pledge of ending the longest war in US history. As it happens, the ISIS Khorasan fighters extinguished by the MOAB were sheltered at an underground tunnel complex near the Pakistani border that was built by the CIA back in the 1980s during the Afghan-Soviet war. Alas, the irony of this detail was completely lost on mainstream media whose proclivity to treat Pentagon newspeak as gospel has been characteristic of not only the last twenty years of US occupation but four decades of American involvement in Afghanistan since Operation Cyclone, the covert Central Intelligence Agency plan to arm and fund the mujahideen, was launched in 1979. Frank Wisner, the CIA official who established Operation Mockingbird, the agency’s extensive clandestine program to infiltrate the news media for propaganda purposes during the the Cold War, referred to the press as it’s “Mighty Wurlitzer”, or a musical instrument played to manipulate public opinion. Langley’s recruitment of assets within the fourth estate was one of many illicit activities by the national security apparatus divulged in the limited hangout of the Church Committee during the 1970s, along with CIA complicity in coups, assassinations, illegal surveillance, and drug-induced brainwashing of unwitting citizens. At bottom, it wasn’t just the minds of human guinea pigs that ‘The Company’ sought to control but the news coverage consumed by Americans as well. In his testimony before a congressional select committee, Director of Central Intelligence William Colby openly acknowledged the use of spooks in journalism, as seen in the award-winning documentary Inside the CIA: On Company Business (1980). Unfortunately, the breadth of the secret project and its vetting of journalists wasn’t fully revealed until an article by Carl Bernstein of Watergate fame appeared in Rolling Stone magazine, whereas the series of official investigations only ended up salvaging the deep state by presenting such wrongdoings as rogue “abuses” rather than an intrinsic part of espionage in carrying out US foreign policy. The corrupt institution of Western media also punishes anyone within its ranks who dares to swim against the current. The husband and wife duo of Paul Fitzgerald and Elizabeth Gould, authors of a new memoir which illuminates the real story of Afghanistan, were two such journalists who learned just how the sausage is made in the nation’s capital with the connivance of the yellow press. Both veterans of the peace movement, Paul and Liz were initially among those who naively believed that America’s humiliation in Vietnam and the well-publicized hearings which discredited the intelligence community might lead to a sea change in Washington with the election of Jimmy Carter in 1976. In hindsight, there was actually good reason for optimism regarding the prospect for world peace in light of the arms reduction treaties and talks between the US and Moscow during the Nixon and Ford administrations, a silver lining to Henry Kissinger’s ‘realist’ doctrine of statecraft. However, any glimmer of hope in easing strained relations between the West and the Soviet Union was short-lived, as the few voices of reason inside the Beltway presuming good faith on the part of Moscow toward détente and nuclear proliferation were soon challenged by a new bellicose faction of DC think tank ghouls who argued that diplomacy jeopardized America’s strategic position and that the USSR sought global dominion. Since intelligence assessments inconveniently contradicted the claims of Soviet aspirations for strategic superiority, CIA Director George H.W. Bush consulted the purported expertise of a competitive group of intellectual warmongers known as ‘Team B’ which featured many of the same names later synonymous with the neoconservative movement, including Richard Pipes, Paul Wolfowitz and Richard Perle. Bush, Sr. had replaced the aforementioned Bill Colby following the notorious “Halloween Massacre” firings in the Gerald Ford White House, a political shakeup which also included Kissinger’s ouster as National Security Advisor and the promotion of a young Donald Rumsfeld to Secretary of Defense with his pupil, one Richard B. Cheney, named Chief of Staff. This proto-neocon soft coup allowed Team B and its manipulated estimates of the Soviet nuclear arsenal to undermine the ongoing Strategic Arms Limitation Talks (SALT) between Washington and the Kremlin until Jimmy Carter and Leonid Brezhnev finally signed a second comprehensive non-proliferation treaty in June 1979. The behind-the-scenes split within the foreign policy establishment over which dogma would set external policymaking continued wrestling for power before the unipolarity of Team B prevailed thanks to the machinations of Carter’s National Security Advisor, Zbigniew Brzezinski. If intel appraisals of Moscow’s intentions and military capabilities didn’t match the Team B thesis, the Polish-American strategist devised a scheme to lure the USSR into a trap in Afghanistan to give the appearance of Soviet expansionism in order to convince Carter to withdraw from SALT II the following year and sabotage rapprochement. By the time it surfaced that the CIA was supplying weapons to Islamist insurgents in the Central Asian country, the official narrative dispensed by Washington was that it was aiding the Afghan people fight back against an “invasion” by the Red Army. Ironically, this was the justification for a proxy conflict which resulted in the deaths of at least 2 million civilians and eventually collapsed the socialist government in Kabul, setting off a bloody civil war and the emergence of the Taliban. Even so, it was the media which helped manage the perception that the CIA’s covert war began only after the Soviets had intervened. Meanwhile, the few honest reporters who tried to unveil the truth about what was happening were silenced and relegated to the periphery. Paul Fitzgerald and Elizabeth Gould were the first two American journalists permitted entry into the Democratic Republic of Afghanistan in 1981 by the Moscow-friendly government since Western correspondents had been barred from the country. What they witnessed firsthand on the ground could not have contrasted more sharply from the accepted tale of freedom fighters resisting a communist “occupation” disseminated by propaganda rags. Instead, what they discovered was an army of feudal tribesman and fanatical jihadists who blew up schools and doused women with acid as they waged a holy war against an autonomous, albeit flawed, progressive government in Kabul enacting land reforms and providing education for girls. In addition, they learned the Soviet military presence was being deliberately exaggerated by major outlets who either outright censored or selectively edited their exclusive accounts, beginning with CBS Evening News and later ABC’s Nightline. Not long after the Taliban established an Islamic emirate for the first time in the late 1990s, Brzezinski himself would shamelessly boast that Operation Cyclone had actually started in mid-1979 nearly six months prior to the deployment of Soviet troops later that year. Fresh off the publication of his book The Grand Chessboard: American Primacy and Its Geostrategic Imperatives, the Russophobic Warsaw-native told the French newspaper Le Nouvel Observateur in 1998: Question: The former director of the CIA, Robert Gates, stated in his memoirs that the American intelligence services began to aid the Mujaheddin in Afghanistan six months before the Soviet intervention. Is this period, you were the National Security Advisor to President Carter. You therefore played a key role in this affair. Is this correct? Brzezinski: Yes. According to the official version of history, CIA aid to the Mujaheddin began during 1980, that is to say, after the Soviet army invaded Afghanistan on December 24, 1979. But the reality, closely guarded until now, is completely otherwise: Indeed, it was July 3, 1979 that President Carter signed the first directive for secret aid to the opponents of the pro-Soviet regime in Kabul. And that very day, I wrote a note to the president in which I explained to him that in my opinion this aid was going to induce a Soviet military intervention. Q: Despite this risk, you were an advocate of this covert action. But perhaps you yourself desired this Soviet entry into the war and looked for a way to provoke it? B: It wasn’t quite like that. We didn’t push the Russians to intervene, but we knowingly increased the probability that they would. Q: When the Soviets justified their intervention by asserting that they intended to fight against secret US involvement in Afghanistan , nobody believed them. However, there was an element of truth in this. You don’t regret any of this today? B: Regret what? That secret operation was an excellent idea. It had the effect of drawing the Russians into the Afghan trap and you want me to regret it? The day that the Soviets officially crossed the border, I wrote to President Carter, essentially: “We now have the opportunity of giving to the USSR its Vietnam war.” Indeed, for almost 10 years, Moscow had to carry on a war that was unsustainable for the regime , a conflict that bought about the demoralization and finally the breakup of the Soviet empire. Q: And neither do you regret having supported Islamic fundamentalism, which has given arms and advice to future terrorists? B: What is more important in world history? The Taliban or the collapse of the Soviet empire? Some agitated Muslims or the liberation of Central Europe and the end of the Cold War? If this stunning admission straight from the horse’s mouth is too candid to believe, Fitzgerald and Gould obtain confirmation of Brzezinski’s Machiavellian confession from one of their own skeptics. Never mind that Moscow’s help had been requested by the legitimate Afghan government to defend itself against the US dirty war, a harbinger of the Syrian conflict more than three decades later when Damascus appealed to Russia in 2015 for military aid to combat Western-backed “rebel” groups. Paul and Liz also uncover CIA fingerprints all over the suspicious February 1979 assassination of Adolph Dubs, the American Ambassador to Afghanistan, whose negotiation attempts may have inadvertently thrown a wrench into Brzezinski’s ploy to draw the USSR into a quagmire. Spurring Carter to give his foreign policy tutor the green light to finance the Islamist proxies, the timely kidnapping and murder of the US diplomat at a Kabul hotel would be pinned on the KGB and the rest was history. The journo couple even go as far as to imply the branch of Western intelligence likely responsible for his murder was an agent from the Safari Club, an unofficial network between the security services of a select group of European and Middle Eastern countries which carried out covert operations during the Cold War across several continents with ties to the worldwide drug trade and Brzezinski. Although he was considered to be of the ‘realist’ school of international relations like Kissinger, Brzezinski’s plot to engineer a Russian equivalent of Vietnam in Afghanistan increased the clout of neoconservatism in Washington, a persuasion that would later reach its peak of influence in the George W. Bush administration. In retrospect, the need for a massive military buildup to achieve Pax Americana promoted by the war hawks in Team B was a precursor to the influential “Rebuilding America’s Defenses” manifesto by the Project for the New American Century cabal preceding 9/11 and the ensuing US invasion of Afghanistan. Fitzgerald and Gould also historically trace the ideological roots of neoconservatism to its intellectual foundations in the American Trotskyist movement during the 1930s. If a deviated branch of Marxism seems like an unlikely origin source for the right-wing interventionist foreign policy of the Bush administration, its basis is not as unexpected as it may appear. In fact, one of the main reasons behind the division between the Fourth International and the Comintern was over the national question, since Trotsky’s theory of “permanent revolution” called for expansion to impose global revolution unlike Stalin’s “socialism in one country” position which respected the sovereignty and self-determination of nation states while still giving support to national liberation movements. The authors conclude by highlighting how the military overhaul successfully championed by the neoconservatives marked the beginning of the end for US infrastructure maintenance as well. With public attention currently focused on the pending Infrastructure Investment and Jobs Act to repair decaying industry at home just as the disastrous Afghan pullout has put President Joe Biden’s favorability at an all-time low, Fitzgerald and Gould truly connect all the dots between the decline of America as a superpower with Brzezinski and Team B. Even recent statements by Jimmy Carter himself were tantamount when he spoke with Trump about China’s economic success which he attributed to Beijing’s lack of wasteful spending on military adventures, an incredible irony given the groundwork for the defense budget escalation begun under Ronald Reagan was laid by Carter’s own foreign policy. Looking back, the spousal team note that the ex-Georgia governor did not need much coaxing after all to betray his promises as a candidate, considering his rise to the presidency was facilitated by his membership alongside Brzezinski in the Trilateral Commission, an elite Rockefeller-funded think tank. What is certain is that Paul and Liz have written an indispensable book that gives a level of insight into the Afghan story only attainable from their four decades of scholarly work on the subject. The Valediction: Three Nights of Desmond is now available from Trine Day Press and the timing of its release could not offer better context to recent world events. Tyler Durden Thu, 11/18/2021 - 23:40.....»»

Category: blogSource: zerohedgeNov 19th, 2021

Biden Talks Up Gaza Ceasefire By "End Of The Weekend" Even As Israeli Officials Downplay

Biden Talks Up Gaza Ceasefire By "End Of The Weekend" Even As Israeli Officials Downplay At a moment the Israelis are downplaying the possibility of a new hostage deal with Hamas, President Biden is out there claiming a ceasefire agreement is likely a mere days away. No other leader involved in the Qatar-mediate talks has offered this level of optimism and has certainly stayed away from predicting specific dates. All reports out of the region are negative on the prospect of a speedy truce deal. But Biden while in an ice cream shop in New York with Seth Meyers was asked by a reporter when he thought a ceasefire could begin, to which he answered he hoped a truce would be implemented within days. "Well, I hope by the beginning of the weekend, by the end of the weekend," he said. And that's when he even additionally offered Monday as the day the warring sides will reach a ceasefire. "My national security adviser tells me that we’re close. We’re close. We’re not done yet. My hope is, by next Monday, we’ll have a ceasefire." Screengrab His response was somewhat rambled, given he uttered the words "beginning" of the weekend to then quickly switching to "end" of the weekend, before asserting "by next Monday". It's unclear if the president is going off of anything concrete at all, given Israeli Prime Minister Netanyahu earlier this month temporarily pulled his negotiating team from Doha. He has also repeatedly slammed Hamas' demands as "delusional".  Political commentator Mario Nawfal quips, "Biden says Gaza ceasefire will be agreed by Monday. Hamas says no way. Qatar wonders what he’s been smoking." Yesterday, reports in Israeli media said the Israeli negotiating team is nowhere close: An Israeli official sought to temper expectations on Monday as negotiators flew to Qatar to continue working on a potential hostage deal, telling The Times of Israel that there is not necessarily cause for optimism. "We need to be careful," said the official. "We’re still talking to ourselves." Currently, a proposed US-Israel-Egypt-Qatar deal outlined in Paris this past weekend would see Hamas release 40 hostages in exchange for a six-week pause in fighting. The Israelis would release hundreds of Palestinian prisoners. The Israeli captives that would go free include women, children, the elderly and sick. But there are major obstacles in the way of an agreement, by all accounts. Watch Biden prematurely declare a ceasefire will be likely "by the weekend"... "My national security advisor tells me that we're close, we're close, we're not done yet. My hope is by next Monday we'll have a ceasefire." President Joe Biden on Monday, said he hoped there would be a ceasefire in Gaza which could start by the beginning of next week. — Middle East Eye (@MiddleEastEye) February 27, 2024 One Israeli official was cited in the The Times of Israel as explaining that the biggest gap on which the fiercest disagreement centers remains the question of "the end of fighting, the IDF leaving the Gaza Strip." The official then said, "All the rest, we can figure out," said the official. The Netanyahu government has rejected as a non-starter the Hamas demand that Israeli forces first make a full withdrawal from the Strip before a ceasefire deal can take effect, and hostages can go free. Netanyahu has not only vowed to pursue the full eradication of Hamas, but he hasn't backed off plans for an imminent ground offensive against Rafah, which is teeming with over one million refugees. Meanwhile, Biden almost made it through the full thought... Biden loses his train of thought after ⁦@sethmeyers⁩ asks how Americans can be assured he’s not too old for another 4 years — Tom Elliott (@tomselliott) February 27, 2024 Tyler Durden Tue, 02/27/2024 - 10:40.....»»

Category: dealsSource: nytFeb 27th, 2024

Hamas Responds To Ceasefire Offer With 135-Day "Truce Plan", But Israel Pessimistic

Hamas Responds To Ceasefire Offer With 135-Day 'Truce Plan', But Israel Pessimistic US Secretary of State Antony Blinken is in Tel Aviv for hostage negotiation talks following widespread reports that Hamas has received Israel's truce offer 'positively'. And yet, other statements suggest these talks are in reality just barely getting off the ground. Just before arriving in Israel, Blinken met with another key mediator in the process, Qatari Emir Sheikh Tamim bin Hamad Al Thani, and admitted "there’s still a lot of work to be done." Blinken also stressed Tuesday, "But we continue to believe that an agreement is possible and indeed essential. And we will continue to work relentlessly to achieve it." The Israeli plan envisions a 2-month ceasefire, during which time there would be hostage/prisoners swaps in multiple phases, by the end of which all remaining Israeli and foreign captives would be set free. On Wednesday Hamas finally presented its more detailed response to the Israeli plan. "Hamas proposed a ceasefire to quiet the guns in Gaza for four-and-a-half months [or 135 days], during which all hostages would go free, Israel would withdraw its troops from the Gaza Strip and an agreement would be reached on an end to the war," Reuters writes. The proposed Hamas plan, which Israel now says it is studying intensely, would be implemented according to the proposed stages: Phase one: A 45-day pause in fighting during which all Israeli women hostages, males under 19, the elderly and sick would be exchanged for Palestinian women and children held in Israeli jails. Israeli forces would withdraw from populated areas of Gaza and the reconstruction of hospitals and refugee camps would begin Phase two: Remaining male Israeli hostages would be exchanged for Palestinian prisoners and Israeli forces leave Gaza completely Phase three: Both sides would exchange remains and bodies Senior Hamas leader Ismail Haniyeh, Flash90 The above remains somewhat vague, and perhaps for good reason, given a key point of disagreement has centered on just who gets released from Israeli prisons, as we detailed earlier. During the initial weeklong truce last year, the list of names was negotiated at every phase which saw a new swap, and the deal wasn't renewed precisely because of a breakdown over the list of names. Israeli officials have balked at current Hamas efforts to free several mass murderers and assassins. For example, a top Hamas official has been cited in Israeli media as saying the following:  He mentioned two by name, including Marwan Barghouti, a popular Palestinian leader seen as a unifying figure. Barghouti was arrested by Israel in 2002 and is serving five life terms for planning three terror attacks that killed five Israelis during the Second Intifada. In addition to Barghouti, Hamdan named Ahmad Saadat, head of the Popular Front for the Liberation of Palestine terror group, as well as Hamas prisoners and those from the Palestinian Islamic Jihad terrorist organization. Saadat is serving a 30-year sentence for his role in the 2001 assassination of Israeli tourism minister Rehavam Ze’evi. NBC is meanwhile reporting that the Israeli government remains pessimistic about the reality of a deal being implemented. According to sources from PM Netanyahu's office, Hamas has been demanding the withdrawal of all Israeli forces before an agreement is even reached, which has been a non-starter for Israeli negotiators. "The fact that Hamas is asking for a cease-fire for Israelis to withdraw its forces, that’s something that Israel will never agree to," the Netanyahu official told NBC.  But Netanyahu has consistently said that the operation will not finish until Hamas is wiped out. He has pledged "absolute victory" over Hamas which could in reality take many months if not years. According to fresh Wednesday reports: Israeli PM Netanyahu told US Secretary of State Blinken that he cannot end the war without eliminating Hamas in Rafah, according to Israeli Channel 12. #BREAKING: Defense Minister Gallant to the US Secretary of State in Blinken: "Hamas' answer was formulated so that Israel would refuse it. Their position will lead to the continuation of the war, and our forces will reach other places in Gaza, soon.' — Amichai Stein (@AmichaiStein1) February 7, 2024 Additionally, some within the governing coalition are even talking about Jewish resettlement of the Gaza Strip after the war, and this remains a hot point of contention with Washington, which has condemned such rhetoric. Tyler Durden Wed, 02/07/2024 - 12:30.....»»

Category: personnelSource: nytFeb 7th, 2024

Futures Rebound To Session High After NY Community Bank Reverses Overnight Rout; Record 10Y Auction Looms

Futures Rebound To Session High After NY Community Bank Reverses Overnight Rout; Record 10Y Auction Looms US equity futures and global markets were mixed, while bond yields rose as the Treasury prepared to auction a record $42 billion in 10-year bonds that may indicate if a recent selloff was overdone. As of 7:50am ET, S&P futures rose 0.2%, reversing earlier losses and trading near session highs... ... trading in lock step with sentiment surrounding the latest troubled regional bank, NY Community Bancorp, which tumbled by 16% overnight to the lowest since 1997 after it was downgraded to junk before rebounding more than 10% after announcing it hired Flagstar bank's Alessandro Dinello as executive chairman. In premarket trading, Ford rallied 6% after reporting fourth quarter results that soundly beat expectations and forecast higher profits in 2024. Other automakers are up: General Motors (GM) +1%, Stellantis (STLA) +2%. Snap crashed 30% after yet another terrible company in which the parent company of the Snapchat app reported disappointing revenue in the holiday quarter. Pinterest (PINS) falls in sympathy, -4%. Here are some other notable premarket movers: Cognizant Technology (CTSH) falls 7% after the IT services company gave an outlook that analysts say reflects a weak backdrop. Enphase Energy (ENPH) jumps 13% as investors look past disappointing fourth-quarter revenue and toward a recovery post first-quarter 2024 in Europe and the US, excluding California. FuboTV (FUBO) tumbles 15% after Fox, Warner Bros. Discovery and Walt Disney’s ESPN announced plans to launch a sports-focused streaming service that will feature college and pro games. Ford (F) rises 6% after reporting fourth quarter results that soundly beat expectations and forecast higher profits in 2024. Other automakers are up: General Motors (GM) +1%, Stellantis (STLA) +2% Fortinet (FTNT) climbs 9% after the cybersecurity company reported stronger-than-expected fourth-quarter billings. Perion (PERI) tumbles 11% after the advertising technology company’s full-year projections for revenue trailed the average analyst estimates. Sonos (SONO) jumps 10% after the audio products company’s earnings beat the projections of analysts. Triumph Group (TGI) slides 22% after the maker of aircraft components lowered its projections for net sales and operating income for its fiscal year. VF Corp (VFC) slumps 10% after the owner of Vans reported third-quarter adjusted earnings per share that missed estimates. WestRock (WRK) climbs 5% after analysts see upside potential ahead of a merger with Irish paper and packaging firm Smurfit. Yum China (YUMC) soars 14% after the fast-food restaurant owner and operator reported fourth-quarter comparable sales that beat estimates. Jefferies viewed the increase to dividend per share as a “nice positive surprise.” US Treasury yields rose ahead of the sale on Wednesday, with the 10-year yield hovering around 4.10%. The latest auction comes after a sale of three—year notes saw stronger-than-expected demand. Treasuries steadied after strong economic data triggered a two-day slump and market bets on the speed of Fed rate cuts were dialed back. Central bank officials kept to their cautious tone on Tuesday, indicating that more progress is needed on inflation though rate reductions may be possible later in the year. “The sale should go well given the sizable yield concession that has been factored in following the selloff,” said Marc Ostwald, chief economist & global strategist at ADM Investor Services Int. Ltd. “It would only impact markets if the take-up is weak. Central bank speakers are very much in focus.” European stocks and US futures trade in narrow ranges as investors wait for the next batch of Fed speakers later on Wednesday.  Auto shares outperformed in Europe as Ford rallies ~6% in the premarket after 4Q profit topped estimates.  Meanwhile, shares of European lenders including Deutsche Bank declined on Wednesday amid renewed fears over exposure to the commercial real estate market. The Stoxx 600 Banks Index slipped 0.7%, underperforming the broader market, with declines led by Deutsche Bank, Bawag, Intesa Sanpaolo and Commerzbank.  State-owned German lender Deutsche Pfandbriefbank also fell, extending Tuesday’s slump. German banking regulator BaFin said Wednesday that it is monitoring turmoil in the commercial real estate market, while Deutsche Pfandbriefbank, or PBB, said in a statement today that it increased risk provisioning in 4Q in light of persistent weakness of real estate markets. Bonds in PBB and some other real estate-focused German lenders have been slumping this week after Bloomberg reported that Morgan Stanley analysts recommended clients sell senior bonds issued by PBB because of its exposure to the CRE market in the US. Earlier in the session, the Asian rally slowed as Hong Kong shares dipped amid doubts over the potency of Beijing’s measures to stabilize the market. Volatility is likely to be elevated as Chinese markets are closed for a weeklong Lunar New Year holiday starting Friday. The MSCI Asia Pacific Index rose as much as 0.9% to the highest level since Jan. 2, as traders ignored cautious remarks from a number of Federal Reserve officials. Toyota, AIA Group and Samsung were among the biggest contributors as the regional benchmark advanced for a second day. Key gauges rose more than 1% in South Korea, Singapore and the Philippines. Hang Seng and Shanghai Comp were mixed despite early momentum following the latest support efforts from China which were targeted at real estate financing and new energy vehicles. Nonetheless, Chinese stocks gradually faded some of their initial gains and the Hong Kong benchmark ultimately turned negative. Nikkei 225 was indecisive amid a slew of earnings and with the BoJ reportedly on track for a policy shift by April. ASX 200 gained with the index led by outperformance in mining and property sectors amid lower yields. Indian stocks experienced a bout of volatility after opening higher with lenders rallying while technology stocks dragged. Paytm surged 10% in its second day of recovery, while Adani Green ended 8.4% higher, after briefly erasing all its losses since the Hindenburg report. The S&P BSE Sensex index closed little changed at 72,152.00, while the NSE Nifty 50 Index was also steady at 21,930.50. The regional trend was overwhelmingly higher. In FX, the Bloomberg Dollar Spot Index drifted as the market awaited fresh trading impetus from Fed speakers. The Kiwi dollar led gains against the greenback, while the franc and yen fell. The term structure in USD/JPY shows relatively low demand for long-gamma exposure in the front-end, which picks up when the two-month tenor comes in, as that captures the BOJ and Fed March meetings. In rates, US Treasuries traded lower ahead of the sale on Wednesday, with the 10-year yield rising to 4.12%. Gilts are nursing larger declines after the BOE’s Breeden signaled she’s likely to wait before cutting rates. Her comments also look to have helped the pound, which is the best performer among the G-10 currencies, rising 0.3% versus the greenback. In commodities, oil prices advance, with WTI rising 0.6% to trade near $73.80 after two days of gains as geopolitical risk in the Middle East was partially offset by a report showing stockpiles expanding in the US. Spot gold fell 0.1%. Looking to the the day ahead now, European data releases include German industrial production and Italian retail sales for December, while in the US we get the trade balance for December. From central banks, we’ll hear from the Fed’s Harker, Kugler, Collins, Barkin and Bowman, as well as BoE Deputy Governor Breeden and the ECB’s Muller. Finally, earnings releases include PayPal, Walt Disney and Uber. Market Snapshot S&P 500 futures little changed at 4,975.25 STOXX Europe 600 little changed at 486.42 MXAP up 0.4% to 168.08 MXAPJ up 0.4% to 514.41 Nikkei down 0.1% to 36,119.92 Topix up 0.4% to 2,549.95 Hang Seng Index down 0.3% to 16,081.89 Shanghai Composite up 1.4% to 2,829.70 Sensex little changed at 72,164.41 Australia S&P/ASX 200 up 0.5% to 7,615.84 Kospi up 1.3% to 2,609.58 German 10Y yield down 1 bp at 2.28% Euro up 0.1% to $1.0769 Brent Futures up 0.6% to $79.10/bbl Gold spot down 0.1% to $2,034.59 U.S. Dollar Index down 0.16% to 104.04 Top Overnight News Stocks and bonds fluctuated as the US Treasury prepared to auction a record $42 billion in 10-year bonds that may indicate if a recent selloff was overdone. Losses in the commercial property market, which have already sent some banks in New York and Japan into a tailspin, moved to Europe’s biggest economy this week. Treasury Secretary Janet Yellen said that while losses in commercial real estate are a worry, US regulators are working to ensure that loan-loss reserves and liquidity levels in the financial system are adequate to cope. Recent economic figures and aggressive market bets on rapid interest-rate cuts mean the European Central Bank should be patient before loosening borrowing costs, according to Executive Board member Isabel Schnabel. A more detailed look at global markets courtesy of Newsquawk Asia-Pacific stocks were mostly positive after a decline in global yields and further Chinese support efforts. ASX 200 gained with the index led by outperformance in mining and property sectors amid lower yields. Nikkei 225 was indecisive amid a slew of earnings and with the BoJ reportedly on track for a policy shift by April. Hang Seng and Shanghai Comp were mixed despite early momentum following the latest support efforts from China which were targeted at real estate financing and new energy vehicles. Nonetheless, Chinese stocks gradually faded some of their initial gains and the Hong Kong benchmark ultimately turned negative. Top Asian News China's MOFCOM issued guidelines to support the new energy vehicle industry and will optimise credit support for the NEV sector, as well as improve management for exports. MOFCOM encourages NEV firms to set up R&D centres overseas and will optimise export procedures for NEVs and batteries, while it will guide banks to provide domestic and overseas financial services for the NEV supply chain. European equities are generally lower and have been edging lower since the open; the FTSE MIB remains firmer with banks assisted by gains in BMPS (+5.6%). European sectors are mixed; Autos hold the top spot, with several names benefitting from strong Ford (+6%) earnings after-hours. Meanwhile, China’s MOFCOM has issued guidelines to support the EV industry. Optimised Personal Care is hampered by Sainsbury’s (-3.6%) after its trading update. US equity futures (ES U/C, NQ +0.1%, RTY -0.5%) meander the unchanged mark, with underperformance in the Russell and investors jittery after Moody’s downgraded New York Community Bancorp (-9.3% pre-market) to junk status of Ba2. Top European News UK may have narrowly slipped into a technical recession at the end of 2023, according to NIESR estimates cited by FT. UK will wave through animal products from the EU without checks under a contingency plan if there are capacity issues as ports, according to documents cited by FT. ECB's Schnabel said lower borrowing costs risk flare-up of inflation and that the last mile in bringing down inflation could be the most difficult one. Schnabel also noted that commercial lenders are reducing borrowing rates on mortgages in expectation the ECB will start cutting interest rates soon and that if demand is held back by restrictive monetary policy, it will be much harder for firms to pass through higher costs to consumers, according to FT. BoE's Breeden says she has become less concerned that rates might need to be tightened further; focus shifted to how long rates need to remain at their current level Earnings Ford Motor Co (F) Q4 2023 (USD): Adj. EPS 0.29 (exp. 0.14), Revenue 46bln (exp. 40.12bln); declares Q1 regular dividend of 0.15/shr and supplemental dividend of 0.18/shr. KEY METRICS: Ford Blue revenue 26.2bln (exp. 24.52bln). Ford Model E revenue 1.6bln (exp. 1.91bln). Ford Pro revenue 15.4bln (exp. 13.86bln). Adj. EBIT 1.1bln (exp. 997.4mln). FY24 GUIDANCE: Adj. EBIT 10-12bln (exp. 9.24bln). Ford Pro EBIT at least 8-9bln (exp. 7.05bln). Ford Blue Ebit 7-7.5bln (exp. 6.34bln). (Newswires) Shares +6.1% in pre-market trade Gilead Sciences Inc (GILD) - Q4 2023 (USD): Adj. EPS 1.72 (exp. 1.76), Revenue 7.12bln (exp. 7.10bln). Sees FY adj. EPS USD 6.85-7.25 (exp. 7.21). Sees FY total product sales 27.10bln-27.50bln (exp. 27.66bln). (Newswires) Shares -1.7% in pre-market trade Snap Inc (SNAP) - Q4 2023 (USD): Adj. EPS 0.08 (exp. 0.06), Revenue 1.36bln (exp. 1.38bln). KEY METRICS: Adj. EBITDA 159.1mln (exp. 111.8mln). DAUs 414mln (exp. 411.59mln). ARPU 3.29 (exp. 3.33). GUIDANCE: Q1 revenue 1.10-1.14bln (exp. 1.11bln). Q1 adj. EBITDA loss 55-95mln (exp. loss 32.7mln). Q1 DAUs 420mln (exp. 418.55mln). COMMENTARY: “While we are encouraged by the progress we are making with our ad platform and the improved results we are delivering for many of our advertising partners, we estimate that the onset of the conflict in the Middle East was a headwind to year-over-year growth of approximately 2 percentage points in Q4.” (Newswires) Shares -30.7% in pre-market trade Siemens Energy (ENR GY) - Q1 (EUR): Net 1.88bln (exp. 813mln, prev. -384mln Y/Y), Revenue 7.65bln (exp. 7.42bln, prev. 7.06bln Y/Y), Orders 15.4bln +23.9%. Affirms outlook. (Newswires) Shares +0.8% in European trade TotalEnergies (TTE FP) - Q4 (USD) adj. net 5.23bln (exp. 5.66bln), adj. EBITDA 11.69bln (exp. 11.66bln). Final dividend of 0.79/shr. Plans a USD 2bln share buyback in Q1, which will remain the base level for quarterly buybacks in the current environment. Shares -2.2% in European trade BMPS (BMPS IM) – Q4 (EUR): Net 1.12bln (exp. 340mln), Revenue 993mln (exp. 953mln), Resumes dividend first time in 13 years. CET1 Ratio 18.1% (prev. 15.6% Y/Y). (Newswires) Shares +5.5% in European trade FX Dollar trades within tight parameters of 104.01-16 after yesterday's pullback from Monday's 104.60 YTD peak. Sits below its 100DMA at 104.20 with support seen at 104 and Monday's 103.96 trough. EUR is steady against the USD after printing a YTD low of 1.0722 yesterday. Comments from Schnabel suggest that imminent rate cuts are not forthcoming; Upside sees 100DMA at 1.0784. GBP managing to eke out modest gains vs. the USD after printing a YTD low on Monday at 1.2519. Interim catalysts for the UK are light ahead of a raft of data next week. NZD once again the better performer of the two, this time thanks to stronger-than-expected job metrics overnight. NZD/USD back on a 0.61 handle but needs a more sustained pick-up to reverse the 2024 downtrend. PBoC set USD/CNY mid-point at 7.1049 vs exp. 7.1858 (prev. 7.1082). Fixed Income USTs are pivoting the unchanged mark with newsflow slow thus far though banking fears remain in view after NYCB was cut at Moody's. In a similar fashion to peers, within 110-22+ to 111-21+ WTD bounds; US 10yr due, 3yr was well received. Gilts were unreactive to commentary from BoE's Breeden who said her focus is now on how long to keep rates at current levels, but added little on the timing of easing aside from emphasising the need for more data around pay growth and demand; within WTD levels of 97.71-98.79 with the accompanying 10yr yield yet to reclaim 4.0%. Bunds are at the unchanged mark with initial upside stalling a handful of ticks above Tuesday's 134.55 best and someway shy of the WTD 134.98 peak; EGBs unreactive to soft German Industrial Output; a strong German 2030 outing led to marginal upticks in the complex, but this ultimately proved fleeting. UK sells GBP 4bln 3.75% 2027 Gilt: b/c 3.04x (prev. 3.44x), average yield 4.131% (prev. 3.887%) & tail 0.5bps (prev. 0.2bps) Germany sells EUR 2.476bln vs exp. EUR 3.0bln 2.40% 2030 Bund: b/c 2.15x (prev. 1.92x), average yield 2.22% (prev. 2.7%) & retention 17.47% (prev. 19.0%) Guidance for the Belgium 30yr EUR-denominated syndication at the June 2054 benchmark +7bps. Commodities Crude is firmer but upside remains somewhat limited amid a lack of fresh fundamentals in the mid-week European morning; Brent Apr sits between a USD 78.49-79.04/bbl parameter. Complex ultimately unreactive to reports that Hamas has proposed a 135-day truce which will be in three phases, via Al Arabiya. XAU is flat and within a particular narrow USD 5/oz range thus far, largely moving in tandem with the Dollar with traders on standby for a slew of Fed speakers in the European afternoon. Base metals are contained in the run-up to the Chinese New Year, but prices have been edging into slightly negative territory in recent trade in tandem with the performance across European equities. IEA Executive says seeing delays of oil product deliveries impacting European markets in particular due to Red Sea attacks; global oil markets comfortable with supply with growth from Non-Opec producers and demand not robust due to macroeconomic concerns OPEC executive sees global oil demand to grow by 2.2mln bpd this year and to taper to 1.8mln bpd next year, while the executive added to expect 2022-2045 to see incremental additional demand of at least 60mln bpd, according to Reuters. Geopolitics Hamas proposes 45 day phase where remains and bodies will be exchanged; proposes indirect talks with Israel in the first stage to end military operations and restore total calm, in document seen by Reuters. Hamas has proposed a 135-day truce which will be in three phases, via Al Arabiya. Saudi's Foreign Ministry said there will be no diplomatic relations with Israel without recognising an independent Palestinian state and ending Israeli aggression in Gaza, according to Reuters. Iraq's Foreign Minister stressed in a call with US Secretary of State Blinken a need to return to the negotiation table over the future of the US-led coalition in Iraq and asked Blinken for the US to reconsider sanctions imposed on Iraqi banks, according to Reuters. US Event Calendar 07:00: Feb. MBA Mortgage Applications 3.7%, prior -7.2% 08:30: Dec. Trade Balance, est. -$62b, prior -$63.2b 15:00: Dec. Consumer Credit, est. $15.9b, prior $23.8b Central Bank Preview 11:00: Fed’s Kugler Speaks at Brookings Event 11:30: Fed’s Collins Speaks at Boston Economic Club 12:30: Fed’s Barkin Speaks on Outlook, Regional Economy 14:00: Fed’s Bowman Speaks on Supporting Small Businesses 15:15: Fed’s Remache Delivers Keynote Remarks at NY Fed Conference 16:30: Fed’s Nordstrom Speaks at NY Fed Conference DB's Jim Reid concludes the overnight wrap The market has had a lot thrown at it (positive and negative) over the last week, but the last 24 hours have felt like a pause in proceedings ahead of some very important US inflation data coming up. In the last week alone we've had 25% of the S&P 500 report across 5 “Mag 7” stocks, Meta see the largest single day gain in dollar terms of any stock in history, New York Community Bank fall over -60%, US Regional Banks fall more than -10%, payrolls unexpectedly go into orbit, and 10yr USTs having their 6th largest 2-day yield increase in the last decade. So a fair amount to keep up with. For yesterday, the S&P 500 (+0.23%) posted a modest gain while 10yr yields rallied back -5.8bps after the aggressive 2-day sell-off Friday and Monday. The next major planned events are perhaps the 10yr Treasury auction today and then US CPI revisions on Friday, followed by the January CPI release next Tuesday. Last year, the revisions showed that i nflation had fallen less aggressively in the second half of 2022 which influenced rate cut pricing at the time so one to watch. Even though US equities were subdued in aggregate, beneath the surface there was some reversal of recent trends, with the Russell 2000 (+0.85%) posting a sizeable advance and rebound from a weak 2024 to date (-3.62%), whereas the FANG+ index (-0.52%) lost ground for a second day running (but +9.31% YTD). There were further sharp losses for New York Community Bancorp (-22.2%), which closed at its lowest level since 1997, whilst the KRW Regional Banking Index fell a further -1.41%. After the closing bell, Moody's downgraded New York Community Bancorp's long-term debt rating by two notches from Baa3 to Ba2 and into HY territory. It remains on watch negative. Its shares fell another -15% after the bell. So certainly one to watch today. This story doesn't feel like it's over in terms of wider market attention by a long stretch. By contrast in Europe, there was a much more upbeat session, with the STOXX 600 (+0.63%) closing at a two-year high and Germany’s DAX (+0.76%) also reaching a new all-time high. Fed speakers were a big focus yesterday. First up, Cleveland Fed President Mester struck a cautious tone, saying that “It would be a mistake to move rates down too soon or too quickly without sufficient evidence that inflation was on a sustainable and timely path back to 2%”. Minneapolis Fed President Kashkari noted that “there’s been very good news” on inflation though “we’re not all the way there yet”. In the evening, Philadelphia Fed President Harker struck an optimistic tone, saying that the Fed’s approach “has put us on the path to a soft landing” although he did not comment on rate cut prospects. The comments did little to prevent a partial recovery from the sharp rates sell-off seen over the two previous sessions. Investors dialled up the chance of a rate cut by March from 16% on Monday to 20% by the close. And looking at the year as a whole, the number of rate cuts priced by the December meeting moved up to 122bps, +8.9bps from Monday. That helped Treasury yields fell back again, with the 10yr yield down -5.8bps to 4.10%. Overnight, yields are another basis point lower. Over in Europe it was a similar story, and investors raised the expected number of ECB cuts this year to 133bps, up +8.2bps on the day. That helped yields fall across the continent, with those on 10yr bunds (-2.3bps), OATs (-1.6bps) and BTPs (-2.9bps) all moving lower. But it was gilts that saw the largest outperformance, with the 10yr yield down -5.8bps to 3.94%, which marked a reversal from its underperformance the previous day. The ECB Schnabel has warned against cutting rates too soon in the FT today so we'll see if that gets traction. Her views are already known. In Asia, mainland Chinese stocks are extending this week's gains with the CSI (+0.45%) and the Shanghai Composite (+0.91%) higher on stimulus and stabilisation expectations. However, the momentum looks slightly weaker in Hong Kong as the Hang Seng (-0.07%) is slightly lower after an opening gain of +1.5%. Elsewhere, the KOSPI (+0.98%) and S&P/ASX 200 (+0.48%) are trading higher while the Nikkei (-0.51%) is lower. US futures are largely unchanged. . Looking at yesterday’s other data, Euro Area inflation expectations were mixed in December, according to the ECB’s Consumer Expectations Survey. On the one hand, 1yr expectations were down to 3.2%, but 3yr expectations were up to +2.5%. Separately in Germany, factory orders expanded by +8.9% in December (vs. -0.2% expected), but the construction PMI fell to 36.3 in January. The factory orders ex large orders series was -2.2% which wasn't so great and more in line with the weak economy. To the day ahead now, and data releases include German industrial production and Italian retail sales for December, along with the US trade balance for December. From central banks, we’ll hear from the Fed’s Harker, Kugler, Collins, Barkin and Bowman, as well as BoE Deputy Governor Breeden and the ECB’s Muller. Finally, earnings releases include PayPal, Walt Disney and Uber. Tyler Durden Wed, 02/07/2024 - 08:14.....»»

Category: personnelSource: nytFeb 7th, 2024

Oil Dumps After Another Headline Praising "Positive Hamas Response" To Israel Truce Negotiations

Oil Dumps After Another Headline Praising "Positive Hamas Response" To Israel Truce Negotiations It's been a few days since we had a breaking headline out of the Israel-Hamas ceasefire talks, and so Qatari decided to break the silence with another market test: *HAMAS RESPONSE IN NEGOTIATIONS IS `POSITIVE:' AL THANI ...which instantly led to another algo-driven dump in oil, just like last week when Al Jazeera reported, briefly, that Hamas had a 'positive response' to the Israeli truce terms... before deleting the tweet. "Hamas says they have dealth with the proposal in a positive spirit to ensure a comprehensive ceasefire, end the aggression, lift the siege and exchange prisoners," according to news wires. Additionally there's 'hope' on the northern border as well, at a moment Israel and Hezbollah's daily tit-for-tat strikes continue spiraling:  US and four European allies hope to announce in the next few weeks a series of commitments made by Israel and Hezbollah to diffuse tensions and restore calm to the Israel-Lebanon border, according to two Israeli officials and a source cited by Axios. The dump quickly reversed, however, when algos read the rest of the statement, namely that not even Al Thani could give details on the framework of the deal at the time. Still, with the oil shorting CTA army reactivated (despite being near 100% net short oil, CTAs somehow always find some more capacity to short oil some more), and even though the latest headline was not actual news, oil is now down 50 cents and sliding because apparently peace is about to break out in the Middle East any second. And now, very quickly almost back to unchanged on the top side... Meanwhile, as reported previously, ceasefire negotiation efforts have involved not only Qatar but Egypt too, with the latest days of most intense talks happening in Paris, involving CIA Director William Burns. Israel is coming under increased pressure to wrap up a deal, but which has brought deep splits in the governing coalition to the forefront. Per Israeli media on Tuesday: Opposition leader Yair Lapid on Monday warned Prime Minister Benjamin Netanyahu against continuing to give power to National Security Minister Itamar Ben Gvir, reiterating his offer to enter the government to replace the ultranationalist, in order to secure backing for a deal to free hostages still captive in Gaza. Lapid’s comments came as Netanyahu’s political allies continued to aim fire at US President Joe Biden’s administration, risking a downturn in ties already frayed by ongoing fighting in Gaza, with increasing pressure by Washington to wrap up the Gaza offensive after nearly four months. "The proposed three-part deal, formulated during international intelligence chief meetings in Paris, includes a notable provision—Hamas's demand for the release of 150 Palestinian prisoners for each female Israeli soldier set free," Israeli media sources have noted of the ongoing talks. Israel has sought the release of all prisoners held in Gaza by the end of a multi-phased plan, which could see a 2-month "pause" in fighting - though Netanyahu has still consistently expressed the goal of seeing Hamas totally eradicated. Tyler Durden Tue, 02/06/2024 - 12:49.....»»

Category: smallbizSource: nytFeb 6th, 2024

Iraqi Parliament Is Calling To Ditch US Dollar For Oil Trade

Iraqi Parliament Is Calling To Ditch US Dollar For Oil Trade Via The Cradle The Finance Committee in the Iraqi parliament made a statement on Wednesday calling for the sale of oil in currencies other than the US dollar, aiming to counter US sanctions on the Iraqi banking system.  "The US Treasury still uses the pretext of money laundering to impose sanctions on Iraqi banks. This requires a national stance to put an end to these arbitrary decisions," the statement said. "Imposing sanctions on Iraqi banks undermines and obstructs Central Bank efforts to stabilize the dollar exchange rate and reduce the selling gap between official and parallel rates," it added. The Finance Committee affirmed its "rejection of these practices, due to their repercussions on the livelihoods of citizens," and reiterated its "call on the government and the Central Bank of Iraq to take quick measures against the dominance of the dollar, by diversifying cash reserves from foreign currencies." Washington imposed sanctions on Iraqi Al-Huda Bank this week, under claims of laundering money for Iran. Several other banks have been hit with similar sanctions over the past year. The statement came the same day a senior US Treasury official said Washington expects Baghdad to help identify and disrupt the funds of Iran-backed resistance factions in Iraq. "These are, as a whole, groups that are actively using and abusing Iraq and its financial systems and structure in order to perpetuate these acts and we have to address that directly. Frankly, I think it is clearly our expectation from Treasury perspective that there is more we can do together to share information and identify exactly how these militias groups are operating here in Iraq," the official stated.  Three US soldiers were killed in an Iraqi resistance attack near the Syrian–Jordanian border on January 28. Near daily Iraqi attacks on US bases in Iraq and Syria have now been halted after the killing of the US soldiers, following Iraqi government pressure on resistance groups, primarily the Kataib Hezbollah faction. The government in Baghdad has faced pushback from Washington for its attempts to diplomatically facilitate a withdrawal of US troops from Iraq, and a transition of US presence in Iraq to an "advisory role."  The US exercises significant control over the Iraqi financial system. Due to US sanctions, Baghdad has struggled to pay hefty energy debts owed to Iran. Additionally, Iraqi oil revenues are transferred to the Federal Reserve Bank of New York. Baghdad requires US permission to access these funds. The Iraqi government recently expressed hope in moving towards de-dollarization.  Iraq is set to implement several new economic measures to further strengthen the national currency against the US dollar, a government source told the Iraqi News Agency (INA) on 14 November. Last May, the Iraqi government announced a ban on the US dollar for both personal and business transactions.  U.S. invasion set Iraq's oil industry back into dollar denomination In October 2000, Saddam Hussein moved to switch Iraq's oil trade from the dollar to the euro. But the U.S. invasion of 2003 set the country's oil industry back into dollar denomination #TheBusinessofWar #Iraqwar — CGTN (@CGTNOfficial) August 13, 2022 “It is clear that Iraq is economically dominated by the US, and our government does not truly control or have access to its own money … We believe that it is crucial to move away from the hegemony of the dollar, especially as it has become a tool to impose sanctions on countries. It is time for Iraq to rely on its local currency,” Iraqi MP and member of the Finance Committee, Hussein Mouanes, told The Cradle in an exclusive interview last year.  Tyler Durden Fri, 02/02/2024 - 06:30.....»»

Category: worldSource: nytFeb 2nd, 2024

Neocons Freak As Biden Reportedly Considers Syria, Iraq Withdrawal

Neocons Freak As Biden Reportedly Considers Syria, Iraq Withdrawal Via The Ron Paul Institute Neocon heads (like the Middle East Institute’s Charles Lister’s) are exploding with the news this week that the Biden Administration may be considering withdrawing from its illegal occupations in both Syria and Iraq. First on Syria. As Lister opines in Foreign Policy: …four sources within the Defense and State departments said the White House is no longer invested in sustaining a mission that it perceives as unnecessary. Active internal discussions are now underway to determine how and when a withdrawal may take place. Lister, an early and stalwart supporter of the al-Qaeda-affiliated insurgency against Assad in Syria, warns of “the catastrophic effect that a withdrawal would have on U.S. and allied influence over the unresolved and acutely volatile crisis in Syria,” adding that, “it would also be a gift to the Islamic State.” Ah. ISIS. Remember them? We haven’t heard anything from them in awhile. That moveable feast. From not long after Syria’s Assad invited Russia in to rescue the country as it teetered on the verge of total takeover by the U.S.-backed “freedom fighters.” But…suddenly and if on cue…they’re BACK! Just when after more than a hundred recent attacks on the US occupation bases have convinced even Biden and his “Middle East experts” that it’s only a matter of time before lots of American blood is shed, ISIS suddenly comes roaring back for the neocons to use in attempt to justify Washington’s continued presence in the region. Very convenient. But perhaps someone has reminded Biden that it’s an election year and voters might start questioning just why and under what authority American troops are stationed in Iraq and Syria. Especially as the “resistance” rockets (and missiles?) are getting closer. Similarly to what Lister is panicking about regarding U.S. occupation of Syria, CNN is reporting today that “U.S. and Iraqi governments expected to start talks on future of U.S. military presence in the country.” Writes CNN’s deep state mouthpiece Natasha Bertrand, “The U.S. and Iraq are expected to soon begin talks on the future of the US military presence in the country, according to sources familiar with the matter, amid public calls from the Iraqi government for the US to withdraw its troops.” Bertrand quotes several denizens of DC’s “think-tank-topia” who warn that pulling out U.S. “trip-wire” troops from Iraq and Syria could negatively effect their plans for war with Iran…er…could um…embolden ISIS! Bertrand quotes MIC-funded CSIS “deep thinker” Jon Alterman: Still, rumblings of a potential US change in its force posture in Iraq would be a victory for Iran, Alterman said. ‘Any sign that this is the beginning of the end would be widely celebrated in Iranian corridors.’ Ah yes! Should the U.S. end its illegal occupation of Syria and Iraq, Iran would celebrate! Those dastardly mullahs! How dare they celebrate no hostile troops on their border! You know who else would celebrate? Every single mother, wife, husband, and relative of those American troops being forced to sacrifice their very lives for an occupation that has zero to do with the U.S. national interest. Is Biden a cynical and bloodthirsty monster? No doubt. Is he (or his puppet masters) only concerned about keeping that ring in his hands for four more years? Absolutely. But would I celebrate and praise any decision by the Biden Administration to do the right thing and get the hell out of the Middle East, starting with the occupations of Iraq and Syria? You’re damn right! As neocon loon Michael Ledeen famously said… "faster please!” Tyler Durden Fri, 01/26/2024 - 19:40.....»»

Category: personnelSource: nytJan 26th, 2024

Iran Mobilizes To Drive US Troops Out Of Iraq

Iran Mobilizes To Drive US Troops Out Of Iraq Via Middle East Eye, When Iraqi Prime Minister Mohammed al-Sudani arrived in New York City in September for the UN General Assembly, a delicate truce was in balance between the two foreign powers that loom over Baghdad. Iraqi paramilitaries, backed by Iran, had frozen their attacks on US troops in the country. Iraq’s new leader arrived in New York City amid the lull. He was feted on a circuit of swanky receptions with western businessmen and diplomats on the sidelines of the General Assembly, as he pitched Iraq’s oil-rich but corruption-riddled economy as an investment destination. Four months later, the Iraqi leader is condemning Iran and the US for launching deadly strikes in his country and his investment pitch to the global elite at Davos Switzerland is overshadowed by his call for the US military and its coalition partners to leave Iraq. Since the Hamas-led attacks on October 7 and the war in Gaza, Iranian-backed militias have launched at least 70 attacks on US forces in Iraq. Iraqi security forces deploy near the gate of the Green Zone in Baghdad, AFP. In early January, the US hit back with its most powerful response yet, launching a drone strike in Baghdad that killed Mushtaq Taleb al-Saidi, also known as Abu Taqwa, a senior commander in the Popular Mobilization Units, an umbrella organisation of Iraqi state-funded and Iran-aligned, Shia militias. Baghdad hit out at the strike as “a violation of Iraq’s sovereignty”. But no sooner was Iraq chastiszing the US for the strike, when Iran launched a barrage of ballistic missiles into the Iraqi city of Erbil, killing four people, including a prominent Kurdish real estate developer and his one-year-old daughter. Baghdad slammed Tehran’s allegation that the house struck in Erbil was an Israeli Mossad “spy center”. At Davos, Sudani called the strike "a clear act of aggression”. Iraq has recalled its ambassador to Tehran and says it will file a complaint at the UN Security Council. The dual rebukes of Iran and the US underscore the tightrope Baghdad is walking as the war in Gaza seeps out beyond the besieged Mediterranean enclave’s borders. Across the region, Tehran and Washington are flexing their muscles, vying to outflank each other in a deadly proxy war. The shadowy conflict has taken on different flavours that reflect local and geopolitical realities. In Lebanon, the US is trying to de-escalate fighting between Israel and Hezbollah, with both sides wary of being dragged into a wider conflict. Meanwhile, Iran-backed Houthi fighters in Yemen have made themselves targets of US air strikes as a response to their attacks on commercial shipping. But the conflict is perhaps at its most intense, and complex, in Iraq. “The Iraqi government is weak, divided and fundamentally can’t control conflict on its borders from foreign powers,” Renad Mansour, director of the Iraq Initiative at the Chatham House think-tank, told Middle East Eye. “It emerged as the playground of choice, where the US and Iran can fight it out. The risk of escalation here is lower for both. And they can show force and compete for influence.” Syria, through Iraq  For Iran and its Iraqi allies who dominate Baghdad’s government, the war in Gaza has presented an opportunity to drive home their goal of expelling the US from Iraq. A former senior US official and an Iraqi official told MEE that there has been increased coordination between Iranian-backed paramilitaries in Iraq and Lebanese Hezbollah with that aim. According to media reports, a top Hezbollah official, Mohammad Hussein al-Kawtharani, arrived in Baghdad earlier this month to oversee the operations. Iran-backed "Islamic Resistance in Iraq" published a video "targeting Ain Al Assad AB with a UAV". Looks quite similar to the one that was used for attacking Erbil before. — Aleph א (@no_itsmyturn) January 22, 2024 “Instead of attacking Israel, what we are seeing in Iraq are more attacks on US forces,” Andrew Tabler, a former Middle East director at the White House’s National Security Council, told MEE. The pressure building in Baghdad to expel US troops has been underlined by Sudani’s public calls for an exit since the assassination of Abu Taqwa. If he follows through, experts say it would present a strategic victory for Iran. Roughly 2,500 US troops are in Iraq to advise and train local forces as part of a coalition to defeat the Islamic State militant group. They are mainly based in Baghdad and northern Iraq’s autonomous Kurdish region. The latter is especially important for providing logistical support to 900 US troops in northeastern Syria. The US’s legal justification for being in Syria is also based on its agreement with Baghdad. “Erbil is crucial for supporting Syria,” Tabler said, referring to the capital of Iraq’s autonomous Kurdistan region. “The US needs to have the ability to move troops and supplies on the overland route between the Iraqi frontier and Syria.” Speaking in Davos on Thursday, Sudani said that “ISIS is no longer a threat to the Iraqi people,” and that "the end of the international coalition mission is a necessity for the security and stability of Iraq”. The Biden administration and Baghdad were already negotiating the future of the US-led coalition in Iraq before the war in Gaza erupted, a former senior US official told MEE, but the war changed Washington’s approach to the talks. “It doesn’t look good to be discussing a drawdown when the Iranians are attacking US soldiers with missiles and drones. So there is a sense from the administration that we need to pause these talks.” While the US continues to conduct small-scale raids against IS cells in the region, Washington views its military footprint in northeast Syria as a key counterweight to Iran and Russia, which back the Bashar al-Assad government in Syria. “The US mission in northeast Syria depends on Iraq,” Joel Rayburn, a former US special envoy for Syria, told MEE. 'Same foxhole' The US military presence in Iraq has ebbed and flowed since the invasion 20 years ago. In 2011, the US pulled all of its forces from Iraq, only for them to return in 2014 at the invitation of Baghdad to fight IS. But in that period, Shia paramilitaries backed by Iran emerged as the most powerful armed groups in Iraq. Trained and funded by Iran, the Popular Mobilisation Units also fought IS. Some groups, like Kata'ib Hezbollah, have been at the forefront of attacks on the US in Iraq. The group’s founder, Abu Mahdi al-Mohandes, was killed in the same US strike that assassinated the Iranian commander, Qassem Soleimani. Via Fox News Today, the PMUs boast more than 150,000 fighters. They maintain vast patronage networks and many are incorporated into Iraq’s official state security apparatus, with the Iraqi government paying their salaries. They have been accused of kidnappings, assassinations and suppressing peaceful protests. The inability of successive Iraqi governments to rein in the sweeping powers of the PMUs has sown discord between Baghdad and Washington. Not only have US forces come under attack from the paramilitary groups, but Washington funds Iraq’s security system. In 2022, Iraq received $250m in military aid from the US. Despite sporadic outbursts of fighting between the paramilitaries and Iraq’s security services, “the cost of going against the militias for the Iraqi government is far higher than the cost of keeping them,” Abbas Kadhim, head of the Iraq Initiative at the Atlantic Council, told MEE. “For Washington, it's an urgency because they are under attack, but it’s not a crisis for the Iraqi state. The militias are fighting in the same foxhole as the Iraqi government.” Pay raise for Iranian militias Sudani is supported by the Coordination Framework, a coalition of Tehran-backed Shia political parties that are tied to many of Iraq’s paramilitaries. While Sudani negotiated a six-month truce that saw attacks on US forces in Iraq stop, the PMUs have gained more influence under his rule, experts say. “Iran-backed militias have a more visible presence on Baghdad’s streets during Sudani's tenure,” setting up new checkpoints, Michael Knights, a fellow at the Washington Institute for Near East Policy, wrote, adding that they have also deepened their business activities. This year, Sudani’s government passed a three-year budget that allocated $700m more dollars to the PMUs, which will allow them to add almost 100,000 new fighters to their ranks, according to analysts. But current and former US and Iraqi officials say Baghdad wants to maintain good relations with Washington. Sudani has framed his call for quick exit of US-led coalition troops as necessary to preserve “constructive bilateral relations” with the US, which he told Reuters could include training and advising Iraqi security forces. His comments are a reflection of the unique ties Baghdad maintains to both Washington and Tehran. The dollar trap Iran and Iraq share a thousand-mile border.  The two Shia-majority countries have an estimated ten million border crossings annually, with many Iranian pilgrims visiting shrines in Karbala and Najaf. Iraq is the second most important destination for Iranian exports and is dependent on Iran for about 35 to 40 percent of its power needs. Iran has never shied away from flexing its economic weight over its neighbor. But Iraq’s finances are also intricately tied to the US. The second largest producer in the Organization of Petroleum Exporting Countries, Iraq depends on its oil revenue to fund its government - including to pay the salaries of Iranian-backed paramilitaries. The proceeds from Iraq’s oil sales are deposited in the US Federal Reserve Bank of New York. A recent US crackdown on money laundering in Iraq has helped fuel a currency crisis in Iraq, showcasing the immense sway Washington has over Iraq’s finances because of its dependence on the dollar. The US has also backed Sudani’s appeal for international investments in Iraq. When Baghdad threatened to expel US-led coalition forces from Iraq after the 2020 assassination of Soleimani, the Trump administration threatened to cut Iraq’s access to its dollar reserves and stop issuing sanctions waivers for Iraq to buy Iranian energy, former US officials familiar with the talks told MEE. The same officials say that cudgel is an option the Biden administration retains if demands for a US exit grow, but some question whether the administration would use it, after trying to reset relations with Baghdad after the tumultuous Trump years. “The US can’t be expelled from Iraq if it doesn’t want to be,” Rayburn, the former US special envoy for Syria, told MEE. “If the US doesn’t have a military presence in Iraq, then the US need not do other things on behalf of the Iraqi government. Like facilitating dollar supply from the Federal Reserve, protecting against lawsuits, and issuing sanctions waivers,” he said. While Iranian-backed militias want to expel the US from Iraq, experts say even the most hardline groups like Kata'ib Hezbollah benefit from Iraq’s economic links to the West. “Even the most anti-American leaders in Iraq realize they need some kind of relationship with the US,” Mansour told MEE. “Iraq is a lifeline for Iran. Its access to US dollars and financial markets is key.” Kadhim, at the Atlantic Council, believes the focus among policymakers in Washington to merely protect US troop presence in Iraq is shortsighted. “Of course, Iran’s ideal goal is to get the US out of Iraq completely, but their practical goal is to make the US presence a liability,” which he says, the Iranians have already achieved. “Basically, you have a small number of US troops in Iraq sequestered to their barracks. They can’t even go to town,”   he said. “In the long run, someone is going to ask why are we here.” Tyler Durden Mon, 01/22/2024 - 23:00.....»»

Category: dealsSource: nytJan 23rd, 2024

Futures Dip As Doubts Emerge About March Rate Cut, US Markets Closed For Holiday

Futures Dip As Doubts Emerge About March Rate Cut, US Markets Closed For Holiday US equity futures were steady on Monday as investors were displeased by hawkish comments from ECB's Holzmann , who said there may not be any rate cuts this year which pushed European stocks to session lows, while also bracing for more earnings later this week. With cash stock markets closed for Martin Luther King Jr. Day and global liquidity especially thin, S&P 500 and Nasdaq 100 futures were down about 0.1% and unchanged, respectively, as 8:00 a.m. ET, after both underlying benchmarks gained last week as the earnings season kicked off. Treasury cash markets are also closed on Monday, although TSY futures suggested yields are higher by about 4bps to 3.98%; the Bloomberg dollar index edged higher following weekend news that a government shutdown had been delayed until March The market is taking a breather after it rallied in nine of the past 10 weeks, with the S&P trading near its all-time high on optimism that the Federal Reserve could start cutting interest rates as soon as March (although over the weekend Morgan Stanley warned this is unlikely as "it would take either some serious stress in financial markets or notable downside surprises to inflation, jobs, or both to get a rate cut in March"). But data released last week showed US headline inflation re-accelerated in December, boosting warnings that funding costs may stay higher for longer. "Markets could be jumping the gun when it comes to the likelihood of March rate cuts,” said Michael Hewson, chief analyst  at CMC Markets in London. European stocks fell as economic data from Germany underscored the ugly backdrop for corporate profits ahead of a raft of speeches by policy makers at the World Economic Forum in Davos this week. The Stoxx Europe 600 index dropped  0.3%, trading at session lows and extending a lackluster start to the year after a 13% rise in 2023. Consumer goods and carmakers led the decline after Germany’s economy dodged a recession, though the latest data showed it contracted for the first time since the pandemic last year. Germany’s 10-year yield rose about five basis points as bonds across the euro region fell as the ECB's Holzmann. “Today’s data could encourage the ECB to speed up monetary easing but we’re now getting at the stage when bad economic news no longer translates into good news for equity markets,” said Benoit Péloille, chief investment officer at Natixis Wealth Management. In the US, market pricing for as many as six quarter-point rate cuts “can be a stretch; bad economic news will start to hurt,” he said. Among individual stock moves in Europe, Dassault Aviation SA slumped after the French aircraft maker reported a decline in 2023 jet orders. Delivery Hero SE and Just Eat NV dropped after BNP Paribas Exane analysts recommended steering clear of Europe’s food delivery sector. Volvo Car AB extended a decline sparked Friday when it said it’s temporarily halting some production due to shipping delays caused by Red Sea attacks. Earlier in the session, the MSCI Asia Pacific share index climbed for a third session. Stocks advanced in Taiwan after the Democratic Progressive Party won the presidential election and the more China-friendly Kuomintang gained too few seats to control the assembly. Meanwhile, the gong show that is China continued, with the CSI 300 Index swinging between gains and losses amid speculation officials may lower the required reserve ratio after the People’s Bank of China unexpectedly left the rate on its one-year policy loans at 2.5% Monday. That was contrary to expectations among economists that it would trim the so-called medium-term lending facility by 10 basis points. “Rate cuts are likely still on the cards, but China looks to be taking a more measured approach to policy easing,” said Marvin Chen, an analyst at Bloomberg Intelligence in Hong Kong. Well they better be because otherwise Beijing is looking at a mass revolt of a population facing a grim and recessionary economy and imploding capital markets. In FX, the Bloomberg Dollar Spot Index rises 0.2%. The kiwi is the weakest of the G-10 currencies, falling 0.8% versus the greenback. The yen drops 0.6%. In rates, bunds fall as economists still doubt the ECB will cut interest rates as much as market pricing currently suggests. German 10-year yields rise 3bp to 2.21%. In commodities, oil prices decline, with WTI falling 0.8% to trade near $72.10, as the risk that air strikes by the US and allies against the Houthis would ignite a wider conflict and disrupt crude flows from the Middle East was balanced by soft fundamentals. Spot gold adds 0.2%. The US is closed for the MLK day holiday today, and there are no official data releases. Looking at the week ahead, along with more US earnings reports, investors this week will be focused on inflation readings in Germany and the UK, as well as a swath of political leaders and officials including Chinese Premier Li Qiang attending the annual WEF. A speech by Federal Reserve Governor Christopher Waller, after officials last week attempted to temper any expectation of a looming rate cut, will also be closely watched. Top Overnight News Japan’s two-year government bond yield declined below zero for the first time since July as global yields have fallen on expectations that major central banks from the Federal Reserve to European Central Bank will start cutting benchmark interest rates this year China’s central bank held a key interest rate steady on Monday while still pumping more cash into the financial system, bucking expectations that it would cut borrowing costs to support the economy The US economy is set for an unexpected fiscal boost if lawmakers back a potential deal for $70 billion worth of tax breaks for businesses and families Oil steadied as the risk that airstrikes by the US and allies against the Houthis would ignite a wider conflict and disrupt crude flows from the Middle East was balanced by softening fundamentals. Global shipping rates are surging as tensions rise in the Red Sea, after the US and UK conducted air-strikes against the Iran-backed Houthi militants in retaliation for their attacks on merchant ships. A more detailed look at global markets courtesy of Newsquawk APAC stocks were mostly rangebound after the lack of significant catalysts over the weekend and with global markets set for a quietened session on Monday owing to the extended weekend stateside.  ASX 200 lacked direction as strength in energy and telecoms offset the weakness in miners and defensives. Nikkei 225 continued on its upward trend and briefly reclaimed the 36,000 level for the first time since 1990. Hang Seng and Shanghai Comp were choppy after the PBoC refrained from cutting its 1-year MLF rate. Top Asian News PBoC injected CNY 995bln (exp. 900bln) in 1-year MLF loans with the rate kept at 2.50% (exp. 10bps cut). China's military, AI institutes and universities have over the past year bought small batches of Nvidia (NVDA) chips banned by the US from export to China, according to a Reuters review of tender documents. US Secretary of State Blinken had constructive discussions on a range of issues with a Chinese minister on Friday which included areas of potential cooperation and areas of differences, while Blinken emphasised the importance of resolving cases of American citizens wrongfully detained or subject to exit bans in China and raised US concerns about human rights abuses, according to Reuters. Taiwan ruling DPP’s William Lai won the presidential election with around 40% of votes which represents an unprecedented third consecutive presidential term for the DPP, although the party did not win a parliamentary majority. Furthermore, President-elect Lai said he can resume healthy and orderly exchanges with China and will use dialogue to replace confrontation, according to Reuters. US Secretary of State Blinken said the US is committed to maintaining cross-strait peace and stability, and peaceful resolution of differences, while he added the US will work with Taiwan to further a longstanding unofficial relationship, consistent with the US one-China policy, according to Reuters. China’s Foreign Ministry said US Secretary of State Blinken’s statement on the Taiwan election sent a seriously incorrect signal to Taiwan's independence separatist forces and seriously violated US promises that it would only maintain cultural, economic and other non-official ties with Taiwan, according to Reuters. The Stoxx Europe 600 extends earlier losses to fall as much as 0.4%, with autos and banks driving weakness. Among cyclical sectors: banks -0.8%, autos -0.7% and retail -0.7% the laggards; travel +0.7% is a rare bright spot. US futures slightly weaker, with S&P 500 contracts down 0.1%, Nasdaq 100 futures little changed; cash trading closed for a holiday Top European News ECB’s Lane said they will have key data by June to decide on rates and that changing rates too fast can be harmful, while he added that once the ECB begins lowering rates, this would not be by a single decision of a rate cut and there would likely be a sequence of rate cuts, according to an interview with Corriere Della Serra. Geopolitics: Middle East Israeli PM Netanyahu reiterated that no one will stop Israel from fighting in Gaza until victory and they will not end the war without closing the hole on the border with Egypt, while he added they must close Gaza’s border with Egypt and are considering several ways to do this, according to Reuters. Israeli military chief said it will consider letting Palestinians displaced from north Gaza to return when there is no danger to them, according to Reuters. Hamas armed wing spokesman Abu Ubaida said any talks before stopping Israeli aggression are worthless and the fate of many hostages has become unknown, while the spokesman added many have been killed and blamed their fate on Israel. Furthermore, the spokesman said they have been told by several parties on resistance fronts that they will expand their strikes in the coming days, while it was also reported that Hamas aired a video showing three Israeli hostages appealing to be freed and Hamas said the fate of hostages will be disclosed on Monday, according to Reuters. US President Biden and other senior US officials are reportedly becoming increasingly frustrated with Israeli PM Netanyahu and his rejection of most of the administration’s recent requests related to Gaza, according to four US officials with direct knowledge of the matter cited by Axios. White House’s Kirby said a lower intensity phase of operations in the Israel-Hamas war is approaching soon. US military announced US forces conducted a strike against a Houthi radar site in Yemen and said strikes are designed to degrade the Houthi’s ability to attack maritime vessels, while a Houthi spokesman said US strikes on Yemen including the latest one on a military base in Sanaa are ineffective, according to Reuters. US President Biden said the US delivered a private message to Iran about Houthi attacks and the US is confident that it is well prepared. It was separately reported that Iranian President Raisi condemned US air strikes on Yemen and said that Washington’s move revealed its true nature which is aggressive and against human rights, according to Reuters and IRNA. Egypt and China are closely following up on developments in the Red Sea and expressed concern over the expansion of the conflict in the region, while they emphasised the importance of uniting international and regional efforts to stop the attack on Gaza, according to a joint statement. Lebanon’s Hezbollah head said it is wrong and ignorant if US President Biden thinks the Yemenis will stop confronting the Israelis in the Red Sea, while he added that what the Americans did in the Red Sea will harm all maritime navigation, according to Reuters. US Central Command said an anti-ship cruise missile was fired on Sunday from the Iranian-backed Houthi military area of Yemen towards USS Laboon operating in the Red Sea, while the missile was shot by a US fighter aircraft and there were no injuries or damage. Iraqi armed factions said they attacked three American bases in Iraq and Syria, according to Al Arabiya. Turkey’s military said it launched air strikes against Kurdish militant positions in Northern Syria and Iraq which destroyed 24 militant targets, according to Reuters. Geopolitics: Other Ukraine promoted a peace plan at Davos on Sunday ahead of the World Economic Forum although China decided not to attend and Russia was not invited to the meeting, according to FT. North Korea fired an intermediate-range ballistic missile which landed outside of Japan’s exclusive economic zone, while North Korea said that it successfully launched a mid- to long-range solid fuel ballistic missile which was equipped with a hypersonic manoeuvring unit and that the launch did not pose a threat to countries around it, according to Yonhap. North Korea’s Foreign Minister travelled to Russia and led a delegation which left Pyongyang on Sunday, according to KCNA. FX DXY remained within a tight range of between 102.30-102.55 amid the US holiday closure. EUR/USD traded indecisively around 1.0950 after last week's whipsawing and lack of pertinent drivers. GBP/USD price action was limited following a very quiet weekend of newsflow from the UK. USD/JPY was marginally higher and reclaimed the 145.00 status amid outperformance in Japanese stocks. Antipodeans were mixed on cross-related flows and after the PBoC disappointed calls for a MLF rate cut. PBoC set USD/CNY mid-point at 7.1084 vs exp. 7.1684 (prev. 7.1050) Fixed Income 10yr UST futures were lacklustre and traded rangebound with US cash markets to remain closed on Monday. Bund futures traded uneventfully in the absence of any major pertinent catalysts for Europe over the weekend. 10yr JGB futures extend on recent gains amid the presence of the BoJ in the market for almost JPY 1.2tln of JGBs, while 2-year JGB bond yields briefly returned to negative territory and printed its lowest since July 2023. Commodities Crude futures were rangebound as demand-related woes offset the geopolitical risk premium. Iraq set February Basrah medium crude OSP to Asia at minus USD 0.80/bbl to Oman/Dubai average and to Europe at minus USD 5.15/bbl vs dated Brent, while it set the price to North and South America at minus USD 1.00/bbl vs ASCI, according to SOMO. Iraq’s Oil Minister said the oil market suffers from many challenges that affect its stability and that OPEC+ is working to limit these factors by taking the measures necessary, according to Reuters. Qatar appears to have halted sending LNG tankers through the Bab el-Mandeb Strait after US-led airstrikes on Houthi targets raised risks in the key waterway, according to Bloomberg. Spot gold edged marginal gains amid an uneventful dollar and with US participants on an extended weekend. Copper futures nursed some of last week's losses but with the rebound capped by PBoC-related disappointment. DB's Jim Reid concludes the overnight wrap It’s a US holiday today (Martin Luther King Day), so it will be a very quiet start to the week. My wife was away at a spa weekend so I’m worn out from shouting at the kids non-stop for 2 days so its a shame I’m not in the US for a break. Although it’ll be quiet, we do have the Iowa Caucus during what is a brutally cold spell in the state with -25C forecast for the vote tonight that traditionally kick-starts the election campaign. The key things to watch are whether Donald Trump can get above the psychological 50% share of the Republican vote (the level recent polls suggest he’s hovering around in the State), and/or how close either Ron DeSantis or Nikki Haley can get to him. While there is clearly a long way to go until November, this will give us some early idea of how successful and deep into the primaries Donald Trump’s opposition for the nomination might go. Staying with politics, on Saturday, Lai Ching-te of the incumbent DPP won the presidential election in Taiwan, as expected, with 40.1% of the vote, ahead of KMT’s Hou Yu-ih. Attention is likely to turn to the risks of increased tensions between Taiwan and mainland China, with Bejing’s officials having referred to Lai as a “troublemaker” and “separatist” ahead of the election. So far there hasn't been any escalating rhetoric from the winning party or from China so markets will probably see the immediate tail risk as reduced although this is something that probably bubbles under the surface for a long time ahead. For more information on the context of what is at stake, Marion Laboure and Cassidy Ainsworth-Grace published a presentation pack on the election and surrounding issues last week. See the full report here . The other geopolitics to watch out for are those around the US/UK strikes against Houthi rebels in Yemen towards the end of last week. In terms of the rest of the week ahead, the highlight is likely to be US December retail sales on Wednesday which will have a impact on Q4 GDP forecasts and momentum into Q1. Housing starts and permits (Thursday) and existing home sales (Friday) will also sharpen those forecasts. The latest UoM consumer survey is out Friday, including the latest inflation expectations series which has moved markets in recent months. Our economists point out that in a week of lots of Fed speak, Waller tomorrow (11am EST) might be the most important as his dovish shift in November helped spark the momentum towards the Fed’s dovish pivot. Earnings season will also slowly build in the US too this week. In addition, US lawmakers will vote after today's holiday on yet another stopgap spending bill to avert a partial government shutdown this Saturday. It seems they are pushing this into March. So no doubt we'll be in a similar position again then. In Europe, UK labour market indicators (tomorrow), inflation data (Wednesday) and retail sales (Friday) will be of interest, especially the CPI data. Over in the continent, notable indicators will include industrial production for the Eurozone today and the ZEW survey for Germany tomorrow. Davos also kicks off today so expect lots of headlines and Canada Goose jackets on your business TV screens. Moving on to Asia, the focus in Japan will be on the national CPI release on Thursday and China’s Q4 GDP and December economic activity indicators on Wednesday. Check out the full week ahead calendar at the end as usual with key data, speaker and earnings releases flagged. Asian equity markets are mostly trading higher this morning with the Nikkei (+1.16%) again leading gains, while Chinese stocks are recovering from earlier losses with the CSI (+0.17%) and the Shanghai Composite (+0.36%) moving higher even after the PBOC left its medium-term policy loans rate unchanged (more on this below). Elsewhere, the KOSPI (-0.07%) is swinging between gains and losses with the Hang Seng (-0.15%) seeing minor losses. US stock futures are flat with cash Treasury trading closed due to today's holiday. Coming back to China, the PBOC defied market expectations for a cut as it held the rate on some 995 billion yuan ($139 billion) worth of one-year medium-term lending facility (MLF) loans intact at 2.50%. The MLF was last cut in August 2023, from 2.65%. Recapping last week now. Despite the upside surprise to the CPI on Thursday, investors grew increasing confident that the Fed is likely to cut rates soon, with the CPI details suggesting more moderate PCE inflation, the Fed’s preferred gauge. This momentum continued on Friday after data showed a greater-than-expected decline in the PPI. US December PPI fell -0.1% (vs 0.1%) month-on-month and rose 1.0% in year-on-year terms (vs 1.3% expected). With some measures in the PPI, like healthcare and portfolio management, also captured in the core PCE, a weaker PPI therefore implies a softer core PCE print and greater justification for the Fed to cut rates. Off the back of this, investors raised their expectations of a 25bps Fed cut by March, rising from 78% to 83% on Friday, up from 63% at the start of the week. And 168bps of cuts are now priced it by end-2024, 30bps more than a week earlier. So that’s nearly seven 25bps cuts now expected by the market from the Fed this year. With the soft producer price data reinforcing Fed cut bets, 10yr Treasury yields declined by -2.6bps on Friday, and -10.6bps on the week to 3.94%. The short-end outperformed, as 2yr yields fell -10.2bps to 4.15% (-23.7bps week-on-week), their lowest level since last May. The bond rally was driven by real rates, with the 10yr real yield down -15.7bps and the 2yr -32.2bps on the week. By contrast, 10yr breakevens (+4.1bps Friday and +5.1bps over the week), reached their highest level since November at 2.28%. Over in Europe, 10yr bund yields fell -5.0bps on Friday but rose +2.8bps in weekly terms. Equities fluctuated on Friday but rallied over the week, supported by the rates rally. The S&P 500 gained +1.84% last week (+0.08% Friday), ending the week just 0.3% below its record high at the start of 2022. Soft earnings releases by several US banks on Friday drove the S&P 500 Banks index down -1.27% on Friday, and -3.37% in weekly terms. The tech-heavy NASDAQ outperformed, up +3.09% over the week (+0.02% on Friday) in its largest weekly move up since the start of November. Gains were largely driven by the tech giants, as the Magnificent Seven index of megacap stocks rose +4.25% (-0.16% on Friday). In Europe, the STOXX 600 jumped +0.84% on Friday but traded near flat (+0.08%) on the week. Lastly in commodities, geopolitical risks returned to the fore after the US and UK launched air strikes against Houthi rebels in Yemen. With risks escalating for Red Sea commercial shipping, Danish fuel-tanker company, Torm, announced its intention to pause transits through the Southern Red Sea on Friday. These developments drove Brent Crude prices above $80/bbl in early trading on Friday, before finishing the day at $78.29/bbl (+1.14% on the day). That said, they were down slightly (-0.60%) on the week after an earlier decline on news of Saudi Arabia lowering its selling price. WTI crude similarly rose +0.92% on Friday to $72.68/bbl but was down -1.53% on the week. Rising geopolitical risks in the Middle East also saw gold rally +1.72% on Friday (+0.18% on the week) Tyler Durden Mon, 01/15/2024 - 08:26.....»»

Category: blogSource: zerohedgeJan 15th, 2024

Macleod On The Geopolitical Year-Ahead: BRICS, Gold, & Israel Gone Rogue

Macleod On The Geopolitical Year-Ahead: BRICS, Gold, & Israel Gone Rogue Authored by Alasdair Macleod via, 2024 will see a quickening pace for geopolitical developments, with the influence of the US waning while that of China and Russia waxes.  As a lost cause, the war in Ukraine will be abandoned by America and NATO in the next few months. The dangers in the Gaza situation are likely to escalate, with the US being played by Iran acting in collusion with Russia through the Houthis.  The days of US divide and rule over Middle Eastern states are over. And if Israel thinks it can simply drag America into the Gaza horror story it has badly miscalculated.  Russia has taken over the presidency of BRICS, and in his New Year speech President Putin stated there will be over 200 meetings and events planned. The final definitive meeting will be in Kazan in October. It seems reasonable to assume that Russia will ensure that all current members will be educated towards the merits of adopting a gold-backed trade settlement arrangement instead of the dollar. The new currency is likely to replace the dollar as the intermediate step between non-dollar currency transactions. And it also makes compelling sense for Russia to put the rouble on a gold exchange standard as well, because it is one of the few economies that won’t require cuts in public spending to facilitate it. And as the dollar slides, China must follow in order to prevent the yuan going down with it. And finally, 2024 is the year of the presidential election in America, which means pork barrels for all. And with the debt limit in place until January 2025, it is in both parties’ interests to maximise spending before the new cap in spending is agreed. Could this be the year the dollar dies? Read on! The world is a’changing… On British TV, the days between Christmas and New Year are a time of old films, and David Lean’s iconic Lawrence of Arabia was shown for the umpteenth time. Like all films based on true events, its connection with reality is somewhat elastic. But it did remind us of the duplicity and arrogance of Britain and France drawing the Sykes-Picot line to divide up the Ottoman lands in Palestine over the heads of the inhabiting tribes, without regard to their territorial rights and Lawrence’s successful Arab Revolt which united the Bedouin tribes for the first time. That political reality notwithstanding, Lawrence’s legacy and his role in uniting Bedouin tribes into the Arab nations gave Britain enduring influence in the region, certainly until long after the Second World War. But the Sykes of Sykes-Picot wasn’t the only interfering busybody in London. Prime Minister Balfour with his Declaration in 1917 opened the Pandora’s box which today is the modern state of Israel. However, sense in Westminster did occasionally prevail. When Harold Macmillan made his winds of change speech at Cape Town in 1960, Britain was acknowledging that it could no longer resist the rising tide of nationalism flooding into Africa and elsewhere. Months earlier, he had appointed my uncle, Iain Macleod, as Colonial Secretary to accelerate the transition to independence for many of Britain’s colonies. And later in the 1960s when Harold Wilson was Labour Prime Minister, he abandoned British military presence “East of Suez”. Britain’s politicians in both parties had accepted the reality of Britain’s declining influence. Today, America’s permanent establishment takes a different view, not prepared to even consider the decline in its influence. If only the US was more pragmatic, perhaps the world would have fewer wars. Despite extremely costly post-war campaigns in Korea, Vietnam, and up to the present day America’s victories have only been pyrrhic in nature, ruinous to the nation and the dollar. And despite the decline of its fading empire, this statist version of Don Quixote is still tilting at imaginary Asian windmills. But pyrrhic victories are now turning into outright defeats. Afghanistan, and now Ukraine which is still a disaster in progress. Recent intelligence is that Valery Zaluzhny, commander in chief of the Ukrainian army has been talking to Valery Gerasimov, chief of the general staff of Russia’s army, and Russia’s first deputy minister of defence about a truce/peace settlement.[i] Crucially, President Zelensky has been bypassed. In response he is redoubling his efforts to recruit more soldiers in a depleted male population. But he faces increasing apathy from his NATO backers.  Seymour Hersh’s information is that while the White House is still against peace proposals, it will happen without Biden’s agreement. To summarise, the politicians in Ukraine and Washington are now out of the loop. This is the second time we know of that the West has turned down peace talks, the first brokered by Turkey. Since then, it is reported in the West that there have been 70,000 needless Ukrainian military casualties. But these figures are based on government propaganda, so the true figure is almost certainly considerably higher. It is against this background that the Russians are stepping up their missile attacks on public buildings as far west as L’viv close to the Polish border. They know that the Ukrainian army has had enough, and they know that Zelensky’s support is fading, both in Ukraine and NATO. It looks like Ukraine’s war will be abandoned by its own army and therefore its NATO backers in the coming months. Israel goes rogue The US and UK will struggle to hold the line on Ukraine. And now there is a far trickier problem to deal with in Israel. It has all the potential for the chaos that turned the assassination of Archduke Ferdinand into the First World War. As far as Western media are concerned, it all started with Hamas’s raid into Southern Israel on 7 October when they killed a number of Israelis and took hostages. But from the Palestinian point of view, the justification for their raid against Israeli settlements was the desecration by Israelis of the Al Aqsa Mosque, Islam’s third holiest site, and increasing settler violence against the Palestinians. And Hama’s viewpoint is shared by two billion Muslims, one quarter of the world’s population. The Muslim world increasingly sees the Israelis as committing ethnic cleansing, taking historically owned Arab territory into their possession. And the existence of significant oil prospects off the Gaza shore is suspected of giving the Israelis a further reason to eliminate not just Hamas, but Gaza as well. America’s initial reaction was to back the Israelis, and as the BBC continually reminds us, the UK government designates Hamas as a terrorist organisation. In the past, Israel’s actions would probably have had unqualified support from NATO members kowtowing to the American line. But that was before Arab unity lined up against Israel and its supporters — unity that now embraces the Saudis and Iran with her rebellious Houthis in Yemen. And that is a major difference today: American action in the region has always had Arab backing from at least some of the major players. The days of America’s divide and rule policies in the Middle East are now over. With a divided Muslim world, two years ago the US Fleet could have attacked Iran under whatever pretext and probably got away with it. Instead, what is thought by many to be little more than a rag-bag army of Houthi tribesmen at the Bab El-Mandeb Red Sea pinch point opposite Djibouti, armed with some cheap drones and basic missiles are threatening the largest, most expensive fleet in the world. We are not sure yet whether the US Fleet has plucked up the courage to fully counter this outrage, given that its so-called Operation Prosperity Guardian has seen three of America’s European allies back out already — Spain, France, and Italy.  It would be a grave mistake to underestimate the Houthis, who, it appears, can even pilot helicopters having been videoed landing them on oil tankers and container vessels entering the Red Sea. Yemen’s civil war and their subsequent attacks against the mighty Saudis appear to have melded them into a formidable guerrilla force. Now that Iran is driving them into peace talks with the Saudis, no doubt the Houthis are itching for a new cause.  Anyway, it is Round One to the Houthis: Red Sea shipping transits are now uninsurable, which appears to be Iran’s objective-by-proxy. There is little doubt that the Houthis will escalate their actions even further, despite the US, UK, Norway, Netherlands, Greece, Canada, and Australia sending warships to the area as their part in Operation Prosperity Guardian. Direct action against the Houthis is likely to inflame their anti-Israeli zeal even more. If words are followed by actions against the Houthis, we can be certain that the objective of protecting safe passage through the Red Sea will not be achieved and the Arab world will be further antagonised. Yet again, America could discover that deterrence becomes provocation. The wider Middle East picture While the Houthis are independent, like Hezbollah they are backed by Iran, dancing to the latter’s tune. But belying its extremist reputation, Iran is playing a calculated game, trying to put sufficient pressure on the Israelis to back down over Gaza. For now, they appear to be restraining Hezbollah to relatively minor attacks in Northern Israel, with the threat that Hezbollah’s involvement could increase if Israel doesn’t back down. Meanwhile, the Israelis appear to be trying to provoke America into direct action against Iran. It could be that the Israelis fear that with the Arab world uniting, their very existence as a nation is more directly threatened and that drawing in American protection is their best option. But without Saudi, Egyptian, and Turkish support the Americans and her western alliance are understandably reluctant to be drawn into a new war. Arab/Iranian unity neutralises the possibility of a deal between Israel and America giving greater protection against Iranian hostility, which presumably involves not just eliminating Hamas but seizing control of Lebanon and/or Syria and eliminating Hezbollah as well. Not only has the ground shifted for America, but it has for the Iranians as well. From being seen as an extreme theocracy issuing fatwas against westerners, Iran has become an integral part of the Asian hegemons’ plans. Russia has secured her partnership in energy, and China her access to the Persian Gulf. Through her membership of the Shanghai Cooperation Organisation — she became a full member last July — Iran is now directly involved in Asia’s wider future. Not only does she enjoy greater protection under the SCO umbrella, but her geopolitics have become aligned with its objectives as well. This explains her tacit backing of Houthi action in the Red Sea, which is considerably more subtle than closing off Hormuz: that remains a backstop in event of a direct threat from America and her NATO partners.  For the Gulf Cooperation Council, representing all the oil and gas producers in the Middle East, the West’s climate change agenda has eliminated itself as a source of long-term energy demand. The GCC’s future is now focusing on Asian markets, dominated by industrialising China and India, who pay lip service to saving the planet but show no signs of reducing demand for fossil fuels. In partnership with China, Russia has played her energy cards well by reeling in the GCC to her sphere of influence. The reality so far as the western alliance is concerned is that the outcome of any action against the Houthis or in Lebanon and Syria to protect Israel’s northern flank will be determined by Russia and China, deploying regional support. It is no longer a matter confined to just the Middle East. BRICS and Russia’s presidency From this week, Russia takes over the BRICS presidency from South Africa and membership expands from five to ten. It was to be eleven. But having applied and been granted membership from 1 January, Argentina withdrew its application on 30 December, leaving a total of ten nations in the organisation whose combined population is estimated at 3.3 billion, about 44% of the world’s population. And of the 30 nations which have expressed an interest last year, a further 15 countries have formally applied to join BRICS. As pro tempore president, Russia will probably authorise further membership applications in a quest to expand BRICS and Russia’s own sphere of influence. My guess is that fossil fuel production and consumption will rank with respect to Putin’s selection. President Putin in his New Year speech outlined Russia’s objectives for BRICS in the coming year. The following is extracted from the English translation:[ii] “In general, Russia will continue to promote all aspects of the BRICS partnership in three key areas: politics and security, economy and finance, and cultural and humanitarian contacts. “Naturally, we will focus on enhancing foreign policy coordination among the member countries and on jointly seeking effective responses to the challenges and threats to international and regional security and stability. We will contribute to the practical implementation of the Strategy for BRICS Economic Partnership 2025 and the Action Plan for BRICS Innovation Cooperation 2021–2024 for ensuring energy and food security, enhancing the role of BRICS in the international monetary system, expanding interbank cooperation, and expanding the use of national currencies in mutual trade. “Our priorities include promoting cooperation in science, high technology, healthcare, environmental protection, culture, sports, youth exchanges, and civil society. “In total, over 200 events of different levels and types will be held in many Russian cities as part of the chairmanship. We encourage representatives of all countries interested in cooperating with our organisation to take part in them. The BRICS Summit in Kazan in October will be the culmination of our chairmanship.” With over five events planned on average every week, Russia has put considerable detail into her agenda for BRICS which will run alongside her military and energy strategies. Clearly, the objective must be to cement hard support from all current and future BRICS members for Russia’s strategic objectives, which must include isolating the dollar as the foreign exchange and trade settlement medium.  Readers will recall that Russia wanted to put a gold backed trade settlement currency on the Johannesburg agenda but failed to secure the required unanimous backing of the then members. With the benefit of hindsight, we can view the early leaking of her proposal as a device to put pressure on the dissenters. But Keynesian India was dead against it, and China was lukewarm. But now Russia will have a more considered and timely opportunity to achieve her gold currency objectives, and the programme of over 200 events is likely to be heavily skewed to achieving this end. BRICS and gold Last year central banks around the world accumulated substantial quantities of gold. There are two obvious reasons for this development. The first is a realisation that reserves held in sovereign currencies bear increasing credit risk due to high government debt to GDP ratios and the threat of confiscation. And the second is an assessment of America’s geopolitical decline. While central bank gold reserves are reported by the IMF and distributed more widely by the World Gold Council, these statistics are only part of the total, with governments feeding bullion into national wealth funds and other accounts hidden from public view. Therefore, the IMF’s statistics are not the whole picture. What we cannot know is how many central bankers truly understand the legal distinctions and differences between money and credit. One can only conclude that if they did the dollar would have already been widely rejected relative to gold, because the former is supported only by belief in it while the latter has proved to be constant over history, replacing fiat regimes every time they eventually fail. Nevertheless, the strategic accumulation of bullion reserves by central banks has been quietly growing over the last decade. But with the US’s insistence that the dollar is money and gold is money no longer, any neutral nation which is probably indebted in dollars anyway is unlikely to provoke the Americans and the IMF into retaliatory action by publicly dumping dollars for gold. The only exceptions are powerful players, such as China and the Saudis, or those already sanctioned, like Russia and Iran. China has been selling US Treasuries and buying gold with the proceeds while Russia continues its anti-dollar rhetoric. We don’t know what Russia was going to propose with respect to using gold in connection with trade settlement in Johannesburg, but the most likely plan would have been to replace the dollar as the common medium between foreign exchange settlements. Other than intergovernmental dealings, the normal procedure for trade settlement is for an importer to sell its national currency for dollars, and either pay dollars to the trade counterparty, or sell the dollars to buy the counterparty’s national currency in order to credit its bank. Assuming a trade deal is not settled in dollars but national currencies, the dollar is still involved. At any one time, outstanding foreign exchange transactions with the dollar on one leg amounts to about $85 trillion. With a growing BRICS organisation together with members, associates, and dialog partners of the Shanghai Cooperation Organisation (SCO) we can see that the majority of the world by population in the Russia/China axis is tied through trade to the dollar because of foreign exchange market conventions. This gives the US a presence in the Russian/Chinese backyard, which is obviously undesirable to the Asian hegemons. Logically, the neutrality of gold is an attractive replacement for the dollar in these trade transactions, with a gold substitute fully redeemable in gold and commercial bank credit created in its denomination acting between currencies. Used for trade settlement, most credit created in the new currency becomes self-extinguishing. Furthermore, as a medium of exchange it can be trusted to hold its value better than an unstable fiat dollar. Any move towards an official readoption of gold for the replacement of the dollar is bound to undermine the dollar’s credibility. It would amount to the greatest challenge to the post-Bretton Woods status quo. Understandably, there must be serious misgivings even within the BRICS camp about the likely consequences of such an important step. But over the course of 2024, the US Government’s debt trap will almost certainly lead to increasing uncertainty over the future value of dollar reserves and of the dollar’s suitability as a medium of exchange. A further consideration, likely to unfold over time, is of the debasement of dollar debt owed by emerging nations which will surely be welcomed by them, assuming they can stabilise their own currencies. In other words, over the course of 2024 the conditions for the replacement of dollars with gold as the international measure of value will improve with the dollar’s decline.  Russia is therefore likely to refine the proposals that failed to make the Johannesburg agenda before presenting them again next October at the meeting scheduled to be at Kazan, where they should have a better reception. It will have become obvious to delegates at that meeting that with the US Government entangled in a debt trap it will struggle to find buyers for US Treasuries other than for short-term T-bills. As I argue below, in the current fiscal year the budget deficit could top $3 trillion, half of which will be debt interest. And the dollar is already showing early signs of decline, reflected in both its trade weighted index and the dollar price of gold. Gold adoption by Russia and China As well as other members of BRICS and the SCO reviewing their relationship with the dollar, Russia and China will have to consider the relationship between a declining dollar and their own currencies. The Keynesian consensus on trade is that currency relationships for net exporting nations maximise trade benefits “when they are competitive”. It is an argument that favours a faster decline in purchasing power than that of the dollar. This line of reasoning is specious, to say the least. It highlights the logic of lower export prices promoting sales, with the less obvious: that a competitive currency policy erodes national wealth and fails to address the relationships between the trade balance, the government’s own accounts, and private sector savings which actually determine the balance of trade.  Inevitably, there must come a point where this popular line of reasoning will be abandoned. Otherwise, the rouble and renminbi will go down with a sinking dollar ship.  The benefits of putting the rouble on a gold standard are obvious and growing all the time. As a matter of fact, in its soviet days Russia was on a gold standard, separately from the Bretton Woods Agreement (which Stalin endorsed but didn’t join) until Khrushchev abandoned it in 1961. The lesson for critics of the rouble devaluation is that it cured nothing, with the decline in the soviet economy continuing, even accelerating. Tin view of this history, there is an appreciation in Russia at the highest levels of the benefits of securing the rouble’s value to gold, eloquently expressed by Sergei Glazyev, economic adviser to Putin in an article for the Moscow business magazine Vedomosti in December 2022.[iii] The benefits are clear: a credible gold standard would allow interest rates to settle at a rate closer to the natural rate for gold, adjusted by the credibility of the arrangement. Instead of the central bank’s key interest rate of 16%, it would likely decline towards two or three per cent. The expansion of the central bank’s credit would be tied solely to its function as an issuer of roubles in return for gold coin and bullion, the expansion of commercial bank credit being driven by commercial demand, productive in nature and therefore non-inflationary. With income tax at 13%—15%(maximum) and government debt estimated at only 22% of GDP, the underlying economic dynamics for the Russian economy do not face the painful readjustment of welfare-driven economies required to make a gold standard stick. The only credible reason Russia has not adopted the obvious gold policy outlined by Glazyev is that for Russia to do so would deliver a death blow to the dollar by comparison, an outcome for which China is not yet prepared. But with the dollar’s debt problem rapidly escalating, China will have to abandon the fallacy that her exports depend on the renminbi weakening with the dollar.  We know from her policies towards gold following the Peoples Bank’s appointment as sole manager of the nation’s gold in 1983, together with global bullion flows into China that both the state and its peoples have accumulated the largest aboveground gold stocks on the planet. This policy would not have been implemented unless far-sighted officials had not foreseen the weaknesses in the dollar-based post-Bretton Woods currency system. The role of gold as money is clearly understood in China. The gathering pace of the dollar’s problems suggests that the transition of the rouble and renminbi to gold standards further undermining the dollar’s credibility will happen sooner than might be expected — even before this year’s end. As to the timing, there are many variable factors, not just the success with which Russia persuades the BRICS membership under her presidency to do away with the dollar in favour of gold, but also her increasingly likely success at expelling US-led NATO from Ukraine and developments in the Israeli/Gaza conflict going Iran’s way. And then 2024 is also the year of political change in the West, which could have an enormous influence on outcomes. US elections and borrowing costs In 2024, the most important election of many will be that of US President on 5 November. Ahead of the US primaries which will determine the two principal contenders, it appears to be between Biden and Trump. In its global impact, it is this election which will matter more than any other. Last June, Biden signed into law the suspension of the debt ceiling until 1 January 2025. Since then, the Federal Government’s debt has accelerated to $34 trillion, the overriding feature being debt interest, perhaps making up nearly half of the budget deficit in this fiscal year. The level of interest rates and therefore the cost of government funding has become a major issue for the Fed, which while notionally independent from the US Treasury in practice is not. It is one of a series of issues which have been troubling markets in recent months. Following the last FOMC meeting, markets have taken the view that the Fed is pivoting from control of inflation to addressing a recessionary economy and the cost of government debt. Accordingly, as well as an ambition to reduce interest rates the next policy move is likely to be the abandoning of quantitative tightening in favour of QE.  With the refunding of maturing debt, it will require over $10 trillion to be found. That’s bad enough. But being an election year, the haggling over spending (reductions are never in the frame) will almost certainly take the debt total to at least $37—$38 trillion at the end of the current fiscal year (to end-September) and possibly even within spitting distance of $40 trillion by the year-end. The inducement to spend, spend, spend while there is no debt ceiling and before negotiations for a new one take place following the installation of the next President, the greater will be the likelihood of outstanding debt hitting $40 trillion before a new ceiling is negotiated. A recession, which is already the true condition, will reduce expected revenue and increase prospective liabilities, potentially driving the budget deficit even higher than $3 trillion. In which case debt hitting $40 trillion in twelve months’ time becomes even more likely. The optics will not be good. Soaring government debt and subdued or contracting GDP will drive the ratio considerably higher. The pressure on the Fed to keep interest rates as low as possible is bound to increase. But the Fed is unlikely to have much control over interest rates anyway because they will be determined by the fate of the dollar’s purchasing power. The dollar’s exchange rate with other currencies will depend on the degree of foreign investment in the Federal Government’s new debt. But other than captive buyers in offshore centres, reserve demand from foreign central banks is already declining. In fact, the two largest holders, China and Japan have already turned net sellers.  In recent months we have seen evidence of difficulties in longer maturity debt auctions and a growing reliance on short-term funding through the T-Bill market. Largely, this is due to banks adjusting their risk exposure away from corporate lending and longer bond maturities, a process which is time limited. Government funding has also absorbed most of the money market funds’ liquidity, which previously had been parked in the Fed’s reverse repo facility. The ease with which the US Treasury has funded the accelerating budget deficit will shortly come to an end, and a funding crisis is bound to ensue. Under cover of a gathering recession, the Fed will face mounting pressure to monetise the debt problem as much as possible. For a fiat currency over-owned by foreign interests the inflationary implications are potentially catastrophic for the dollar. The dollar’s suitability as the international medium of exchange is already facing a challenge from gold, to which the Asian hegemons and their growing band of supporters in BRICS and the SCO are turning. Consequently, with a failing dollar 2024 is set to see a significant decline in the US’s global influence. By wielded her power through the dollar she has created foreign resentment and enemies. This could be the year when America discovers that her grip on the world is ending, and that she should have learned from Britain’s experience and response to the reality of her decline in the 1960s. Tyler Durden Sat, 01/13/2024 - 08:10.....»»

Category: worldSource: nytJan 13th, 2024

Elon Musk"s political influence became even stronger this year

The billionaire SpaceX and Tesla founder is wielding more political influence as his empire of business ventures expand. Elon Musk at the VivaTech conference in Paris.REUTERSWith great wealth inevitably comes influence and power.But Elon Musk is pushing the boundaries, given how many industries he's dominating.With a growing empire of rockets, EVs, social media, and AI, Musk is gaining political clout.Elon Musk isn't known for staying in one lane.He either sits at the head or owns six companies — Tesla, SpaceX, the Boring Company, Neuralink, X, and xAI — and is a pioneering rocket creator, EV manufacturer, and all-round maverick.But should we add geopolitical diplomat to that list?Musk has held billionaire status and all the inherent political clout that brings for over a decade.But in the last year, his control over a variety of key technologies, communication streams, and even national security mechanisms has continued to grow. Not to mention his packed diplomatic schedule of meetings with world leaders.It's a concentration of decision-making and economic might that analysts warn undermines democracy.Here's a look at just how much political influence Elon Musk has.XMusk's $44 billion takeover of Twitter in 2022 hasn't brought him great financial returns.But it has given the tech mogul the role of gatekeeper over one of the world's most influential social-media platforms, with the ability to amplify or ban whoever he pleases.As Musk himself tweeted, in reference to old media sources: "They are no longer the arbiters of opinion."The implication now being that he is.Workers install lighting on an "X" sign atop the downtown San Francisco building that housed what was formally known as Twitter, now rebranded X by owner Elon Musk, Friday, July 28, 2023.Noah Berger/AP PhotoHis management of the platform that plays a key role in documenting and sharing current affairs hasn't filled onlookers with confidence.In December, the European Commission launched an investigation into X over its content-moderation rules and the spread of illegal content.As Musk reinstates a number of prominent banned accounts, such as far-right figure Alex Jones, he's not dissuading claims that marginalized communities are being subject to increasing hate speech on the platform.With a year of elections on the horizon, Musk's apathy towards fighting misinformation could influence US political division.Delivering key infrastructureMusk is the CEO behind two major companies developing core national infrastructure across the world — and outer space.SpaceX dominates its industry and has been responsible for almost 50% of orbital launches this year, per Space News.Crucially, the Pentagon and NASA depend on Musk's rocket company to fly them to space and have paid SpaceX billions of dollars in contracts for space missions.Starshield, a satellite network created for governments to "support national security efforts" has just been announced.It's a relationship that The FT has argued marks the "privatization of defense."Tesla cars charge at a Supercharger station in Irvine, California.MediaNews Group/Orange County Register / Getty ImagesMeanwhile, on the ground, Tesla now controls the nation's biggest network of electric-vehicle charging stations and has world leaders lobbying to host his new gigafactories.There are worries that this dependence gives him leverage to influence national policy and avoid regulation."We should be concerned because the sheer range of his monopolies mean the rules that apply to everyone else often don't apply to him," says David Karpf, professor of media and public affairs at George Washington University."The government has to walk on eggshells with his Tesla and Twitter regulatory violations because of his Starlink and SpaceX exclusive contracts."StarlinkMusk's Starlink satellite network, which offers connectivity to remote and conflict-hit regions, has expanded massively in 2023, with internet traffic from the constellation of around 5,000 satellites nearly tripling globally.Rival networks like Amazon's Project Kuiper or the Chinese government's constellation remain years behind Musk, having only launched a few hundred satellites so far.The capability Starlink gives Musk to administer internet access has already proved controversial, most notably in Ukraine.At the onset of the war, Musk donated thousands of Starlink internet kits to the Ukrainian military forces, helping them overcome Russian cyberattacks and internet blackouts.A Starlink antenna covered with a camouflage net used by the Armed Forces of Ukraine in the Donetsk region.NurPhoto / GettyYet, this October, he was forced to defend his decision to deny the Ukrainian military internet access during an attack that could have decimated Russia's navy in Crimea in 2022.Musk claimed he had averted nuclear war, but his ability to control Ukraine's military operations led to accusations that he was trying to "play god."The issue arose again in the Israel-Gaza conflict when Musk offered Starlink to aid organizations operating in the Gaza Strip after the IDF cut off internet access to the besieged region.Steven Livingston, a political science professor at George Washington University, says this development is extraordinary."It's a reflection of this position that Musk has got himself in, where he's the arbiter of geopolitical events," says Livingston. "Musk ended up being in a position of operational command of another nation's military operations against an invading military force. And that is a problem."xAIMusk's investments in OpenAI and founding of his company xAI, lend him more influence in over policy and regulation of yet another pivotal future technology.He was brought out as the star guest at this year's AI Safety Summit.Rishi Sunak interviewed Tesla and SpaceX CEO Elon Musk Thursday night.WPA/Getty ImagesTania Duarte, cofounder of We and AI, a nonprofit that promotes AI literacy and ethics, says his influence on the direction of AI is "certainly not that he is a great technologist driving forward successful or safe development.""In the six months of proposed pause [in the letter Musk and over 1,000 experts signed in March 2023], he was catching up and launching his own AI chatbot trained on realtime Twitter data, the opposite to pausing," Duarte said.A global diplomat"I would prefer to stay out of politics," tweeted Musk in 2021.That hasn't stopped him taking on the schedule of an international diplomat this year and meeting global leaders from Turkey, France, Italy, Israel, the UK, India, and China.From discussing Tesla expansion to visiting the sites of devastating terror attacks, Musk has used his businesses to cosplay as a statesman.Elon Musk traveled to Israel during the truce between Israel and Hamas. Amos Ben-Gershom (GPO) Handout via Getty ImagesThe concern is how much of a geopolitical wildcard he can be before he threatens national security interests, particularly regarding Tesla's expansion in China.Meanwhile, back in the US, he's been increasingly outspoken about his political views, used X to host a presidential campaign launch for Ron DeSantis, and visited the US border to call for immigration reform."Musk is a new kind of non-state geopolitical actor. He controls nodes of the new global economy and information environment," says Karen Kornbluh, former US ambassador to the OECD and senior fellow for technology at The German Marshall Fund."When he negotiates with foreign leaders he brings incredible leverage," she explains."It remains to be seen if his power and influence will continue to grow or if others in the industries of AI and quantum will eclipse him — but the phenomenon he represents is here to stay for a while."X and SpaceX did not immediately reply to Business Insider's request for comment.Read the original article on Business Insider.....»»

Category: smallbizSource: nytDec 24th, 2023

White House Hysteria: New Domino Theory, Putin Won"t Stop With Ukraine

White House Hysteria: New Domino Theory, Putin Won't Stop With Ukraine Authored by Mike Shedlock via, In an effort to get Republicans to commit hundreds of billions of dollars for Ukraine and Israel, Biden trots out the Domino Theory. Anyone remember that? “Don’t Let Putin Win” Reuters reports Biden Pleads for More Money President Joe Biden pleaded with Republicans on Wednesday for a fresh infusion of military aid for Ukraine, warning that a victory for Russia over Ukraine would leave Moscow in position to attack NATO allies and could draw U.S. troops into a war. Biden spoke as the United States planned to announce $175 million in additional Ukraine aid from its dwindling supply of money for Kyiv. He signaled a willingness to make significant changes to U.S. migration policy along the border with Mexico to try to draw Republican support. “If Putin takes Ukraine, he won’t stop there,” Biden said. Putin will attack a NATO ally, he predicted, and then “we’ll have something that we don’t seek and that we don’t have today: American troops fighting Russian troops,” Biden said. “We can’t let Putin win,” he said. Overestimating Putin Eurointelligence notes we have gone From Complacency to Panic About Putin Western analysts went straight from complacency to panic in their assessment of Vladimir Putin. When Ukraine pushed back, western commentators went as far as to fantasise about regime change in Russia; now the same commentators are warning that Putin is about to occupy Kiev, and then go on to attack Nato. This is utter nonsense. We have warned against under-estimating him. Now we warn against over-estimating him. It takes more than a ban on sales of iPhones and Mercedes cars to deprive him of the technology needed to wage war. At the same time, Putin does not have the means, nor is he unlikely to acquire them, to wage war against Nato – not even a Nato with Donald Trump as US leader. Nato has rightly started to take the defence of its eastern borders more seriously. Finland has just concluded a military deal with the US. So did Sweden. Germany is planning to dispatch an entire brigade to Lithuania. The west is not helpless. Putin has troops he can burn, but the rate at which he is burning them now is unsustainable for him, both militarily and politically. The unsustainable can be sustained for a period, sometimes a long period, but it ends eventually. We heard of a three-year battle plan into 2026. In the end, he will go along with a truce that would secure him some territory in eastern Ukraine and expose the west’s grandstanding rhetoric. Such an outcome would be perceived in Russia as a political victory for him. After the war, we would expect his priority to shift towards infrastructure. Russia has a lot to offer given its geographical location at the centre of the Eurasian continent. The most important strategic project for Russia would be the development of the Northern sea route, from the Baring Sea in the east to the North Sea in the west. The melting of the Arctic ice is making this route viable for large transport. But it would require huge investment into port infrastructure along the way. Post-war Eurasia will be a different place. The Domino Theory Revisited Younger readers may not even be aware of the Domino Theory. The theory stated we need to fight them “over there” or we would be fighting them here. The result was US involvement in Vietnam, initially in a limited fashion, but ultimately in a major war, with overall involvement lasting nearly 20 years. About 8.7 million served during the Vietnam era between 1964-1973, about 3.1 million in Vietnam. 2.2 million people were drafted. 58,279 US military died for nothing and total deaths in North and South Vietnam were about 1.4 million. The US lost the war, dominos did not fall, and Vietnam is now a trading partner. The Veterans Breakfast Club has an excellent refresher course on The Domino Theory in Retrospect The Domino Theory stated simply that Communist victory in one country or region would spark neighboring regions to rise up against pro-American governments, which would lead to more victories and further insurgencies. By keeping the first domino upright—in this case Vietnam—the US could prevent Laos, Cambodia, Thailand, Malaysia, Indonesia, and even India from succumbing to Communist takeovers. It’s striking that the biggest proponent of the Domino Theory during the war, Secretary of Defense Robert McNamara, later confessed, “I think we were wrong. I do not believe that Vietnam was that important to the communists. I don’t believe that its loss would have lead – it didn’t lead – to Communist control of Asia.” In retrospect, said McNamara, “we should have begun our withdrawal from South Vietnam [in 1965]. There was a high probability we could have done so on terms no less advantageous than those accepted nearly six years later–without any greater danger to U.S. national security and at much less human, political, and social cost to America and Vietnam.” In Retrospect In retrospect, we had no business in Vietnam first place. In retrospect, I would have spit on McNamara then and would spit in his face now if he was still alive. In retrospect, US meddling in Ukraine led by John McCain fomented the mess we see today. I strongly advised against US meddling at the time. In retrospect, US support for Israel, no matter what Israel did, contributed to the setup we have today. In retrospect, the war in Iraq and the killing of Hussein led to the formation of ISIS. I vehemently opposed US actions at the time. In retrospect, the US killing of Libyan leader Muammar Gaddafi led to ISIS taking over the country. In retrospect, the US wasted trillions of dollars in Afghanistan, also leaving in defeat. Once again, I said so ahead of time. Please don’t make a fool of yourself comparing Putin to Hitler, or Mideast events to WWII. Israel has proven it can defend itself. And US support for Israel for decades, no matter what, has at a minimum, increased tensions. This post does not support Hamas which Israel has a right to destroy. No Change I was against US meddling in 1966 and have been against meddling ever since. And I have been on the right side of history. The US cannot afford to be the world’s policeman and the results of trying have backfired every time (assuming perpetual war is not the desired goal). Tyler Durden Fri, 12/22/2023 - 07:20.....»»

Category: dealsSource: nytDec 22nd, 2023

S&P Poised For 7th Weekly Gain As Futures Gain Ahead Of $4.9 Trillion Quad-Witching

S&P Poised For 7th Weekly Gain As Futures Gain Ahead Of $4.9 Trillion Quad-Witching 2023 is almost in the history books (the last two weeks of December are usually a volumeless, skeleton crew formality), and the S&P is set to close out the year just shy of all time highs hit in January 2022, largely thanks to the dovish Fed pivot this week and to a relentless buildup (well ahead of said pivot) in Fed reserves which are also closing out the year at 2023 highs... ... and are set for 7 consecutive gains in a row, the longest such stretch since 2017. S&P futures are up 0.2% as of 7:50am, although today's smooth meltup sailing is anything but assured as today we see a record $4.9 trillion option expiration quad witching... ... one which will promptly cancel out the record $8 billion in dealer gamma, which has served as rock-solid gamma gravity over the past two weeks, resulting in a potential spike in volatility. Treasuries were steady after the yield on the 10-year benchmark broke below 4% for the first time since August. The dollar traded in tight range against Group-of-10 peers. In company news, Citigroup is shutting down its municipal business, meaning most of the relevant sales, trading and banking staffers will be leaving in the coming months. Today's key macro events include industrial production and capacity utilisation for November, along with the Empire State manufacturing survey for December and the latest TIC data release. In premarket trading, Intel rose 2.3%, looking set to extend recent gains, after the world’s biggest maker of PC processors unveiled new chips for personal computers and data centers as it seeks to break into the lucrative AI hardware space. Here are some other notable movers: Costco gains 2.8% after reporting earnings per share for the first quarter that beat the average analyst estimate. First Solar rises 2.7%, Enphase gains 3.1% and Sunrun is up by 3.6% after Jefferies initiates a slew of US solar stocks as the broker starts to see tailwinds and a turnaround in performance for the sector. Independence Realty Trust falls 2.2% and Camden Property Trust is lower by 0.8% following downgrades from BMO. Analysts cited concerns over new supply in many of the apartment REITs’ markets. Rocket Lab USA shares rise as much as 15% after the SpaceX rival blasted off for space for the first time since its September failure. The Fed ignited a speculative frenzy this week when it affirmed speculation it’s ready to declare victory on inflation and shift to rate cuts without a significant cost to the economy. US equity funds clocked a ninth week of inflows, taking in $25.9 billion, the longest streak since Dec. 2021, according to BofA's Michael Hartnett. “The pivot is pretty distinct and the Fed is now talking about rate cuts,” Wei Li, global chief investment strategist at BlackRock, said in an interview with Bloomberg TV. “We’re now keen to really think about the selective opportunities that we can take advantage of, as we think about the year that is going to be characterized by rate cuts.” A note of caution from Europe’s central bankers that they’re not ready to follow the Fed’s policy pivot damped some of the excitement. European Central Bank Governing Council member Madis Muller said Friday that markets are getting ahead of themselves in betting that the ECB will start cutting interest rates in the first half of next year. Yesterday ECB President Christine Lagarde said the bank had not discussed rate cuts at all. “The contrast between the resilient US economy adopting a dovish stance and faltering European economies holding on to a hawkish position gives the impression that something is amiss,” Ipek Ozkardeskaya, a senior analyst at Swissquote, wrote in a note to clients. European stocks are on course to log a fifth consecutive week of gains, boosted by expectations of looser monetary policy in 2024 despite that - unlike the Fed - ECB policymakers yesterday pushed back further on dovish expectations, urging patience and data-dependence before any rate reductions emerge. The Stoxx 600 rises 0.5% to its highest since January 2022, led higher by mining and auto shares. Here are some of Europe’s biggest movers today: Trainline shares rise as much as 22% to hit a one-year high following the UK government’s decision to abandon plans to create a rival rail ticketing platform. Barclays upgraded the stock. STMicroelectronics shares gain as much as 2.6% in Paris to the highest since August as Citi names the chipmaker as a top pick in Europe’s tech hardware sector. H&M shares gain as much as 1.4%, in line with the wider Stockholm stock market, after the Swedish fast-fashion retailer reported 4Q sales figures that analysts say were in line with expectations. Inchcape rises as much as 2.7% to a two-month high after BNP Paribas Exane said the automotive stock’s valuation does not reflect its growth potential. Atos shares gain as much as 20% after Le Figaro reports Airbus is in advanced talks to buy the French IT services firm’s big data and cybersecurity (BDS) activities. Sectra shares jump as much as 17%, the most since Sept. 2021, after the Swedish medical imaging and cybersecurity firm reported an increase in 2Q net sales and operating profit. Symrise shares fall as much as 10% after the company posted a profit warning due to inventory writedowns and FX impacts. Santander Bank Polska leads a retreat in Polish lenders after the country’s financial regulator published dividend rules for 2024 limiting the maximum payout to 75% of profits. Campari shares fall as much as 5.9% after the Italian drinks maker agreed to pay at least $1.2 billion for Courvoisier Cognac, a brand that Jefferies described as “dusty and unloved.” Earlier in the session, Asian stocks gained, led by advances in Hong Kong after China’s central bank stepped up support for the economy by adding $112 billion of cash into the financial system. The MSCI Asia Pacific Index rose as much as 1.1% to the highest level since early August, with Tencent, Alibaba and BHP among the biggest boosts. Benchmarks in Hong Kong climbed more than 3% after the People’s Bank of China offered a record amount of cash via its medium-term lending facility. Mainland equities also gained. In a further positive, authorities late Thursday relaxed homebuying curbs in Beijing and Shanghai. A batch of data released Friday showed China’s economic recovery remains patchy, putting more pressure on the government to roll out supportive policies to fuel growth. Hang Seng and Shanghai Comp were varied with notable outperformance in the Hong Kong benchmark amid tech strength although the mainland lagged after mixed Chinese data in which Industrial Production topped estimates but Retail Sales disappointed despite showing double-digit percentage growth, while House Prices continued to decline and attention was also on the PBoC which maintained its 1-year MLF rate at 2.50% but delivered a record net injection through the facility. Japan's Nikkei 225 was lifted at the open and briefly returned to above the 33,000 level amid the global risk-on mood. Australia's ASX 200 was led higher by the commodity-related sectors after gains in oil and metal prices which helped the index shrug off the latest flash PMIs from Australia which slightly improved but remained in contractionary territory. Key stock gauges in India rise, on pace for their record closing highs, driven by a rally in the country’s information technology stocks. The S&P BSE SENSEX Index rose 1.4% to 71,490.13 as of 3:15 p.m. Mumbai time, while the NSE Nifty 50 Index advanced 1.3% to 21,467.80 A gauge of technology stocks on the BSE gains as much as 4.2%, taking its two-day gains to 7.6% In FX, the euro underperforms, falling 0.3% versus the greenback. The pound rises 0.2% after UK  companies reported their strongest growth in six months. Emerging-market currencies and stocks rose on Friday as investors’ appetite for riskier assets soared after the Federal Reserve sent dovish signals this week. The South African rand led gains among its peers as it advanced as much as 1.2% against the dollar to trade at the strongest since August. The Hungarian forint dropped most in emerging markets after the country blocked the European Union’s planned financial aid package for Ukraine. In rates, treasuries are mixed with front-end and belly holding small gains after plying narrow ranges during Asia session and European morning. Long-end lags, steepening 5s30s spread by ~2bp. Treasury 10-year yields around 3.915%, ~1bp richer on the day, trailing bunds in the sector by ~6bp following European PMIs. Gilts also outperform Treasuries despite stronger-than-forecast UK services PMI. Bunds jumped after euro area PMI data missed estimates, raising the risk that the region may experience a recession in the second half. German 10-year yields fall 9bp to 2.03%. US session includes manufacturing data and comments by Fed’s Williams at 8:30am New York time.    In commodities, oil was set to post its first weekly gain in almost two months as the Fed’s latest stance triggered a bullish pulse across markets. WTI rose 0.5% to trade near $72. Spot gold also rose, adding 0.3% Looking to the day ahead now, and data releases include the global flash PMIs for December, and in the US there’s industrial production and capacity utilisation for November, along with the Empire State manufacturing survey for December and the latest TIC data release. Central bank speakers include the ECB’s Holzmann, Centeno, Vasle, Kazimir, Muller, Scicluna, Simkus and Vujcic, along with BoE Deputy Governor Ramsden and Bank of Canada Governor Macklem. Market Snapshot S&P 500 futures up 0.3% to 4,734.00 MXAP up 1.0% to 165.58 MXAPJ up 1.2% to 515.85 Nikkei up 0.9% to 32,970.55 Topix up 0.5% to 2,332.28 Hang Seng Index up 2.4% to 16,792.19 Shanghai Composite down 0.6% to 2,942.56 Sensex up 1.2% to 71,347.18 Australia S&P/ASX 200 up 0.9% to 7,442.69 Kospi up 0.8% to 2,563.56 STOXX Europe 600 up 0.3% to 478.09 German 10Y yield little changed at 2.06% Euro down 0.3% to $1.0960 Brent Futures up 0.4% to $76.88/bbl Gold spot up 0.3% to $2,041.46 U.S. Dollar Index up 0.13% to 102.09 Top Overnight News China’s economic data was mixed for Nov, with strong industrial production (+6.6% vs. the Street +5.7% and up from +4.6% in Oct) but relatively soft retail sales (+10.1% vs. the Street +12.5% and up from +7.6% in Oct). BBG China will target a 2024 fiscal deficit of 3%, lower than the 3.8% objective for this year, although additional fiscal support could come from off-budget debt. RTRS China ramps liquidity via the MLF (the net injection was CNY800B, “the biggest monthly increase on record”) but keeps rates unchanged at 2.5%. RTRS The EU has failed to agree a critical €50bn financial aid package to Ukraine after Hungary’s Prime Minister Viktor Orbán vetoed the proposal, throwing into doubt Europe’s ongoing support to Kyiv. FT The euro-area dipped deeper into contraction, with Germany and France hit particularly hard. Private-sector activity unexpectedly worsened this month, PMIs show, raising the risk of a recession. ECB speakers echoed Christine Lagarde’s pushback on rate cuts, with Francois Villeroy saying the bank will be patient. BBG The EU is set to extend its truce with the US over steel tariffs imposed by Donald Trump until after presidential elections next year. FT Fed QT is feeding angst in overnight funding markets over whether officials are misjudging how far it can shrink its balance sheet without causing dislocations. The Fed said it will slow or halt reductions to make sure reserves remain “ample,” but markets participants said it’s unclear what that level is. BBG Jan Marsalek, the jet-setting former COO of now-defunct Wirecard, enabled Moscow to fund covert operations around the world, officials say; ‘whiff of Silicon Valley’. WSJ Blackstone and CPPIB won a $1.2 billion stake in a portfolio of commercial-property loans from the failed Signature Bank. BBG Trading in call options surged to an all-time high during the Fed-fueled stock rally Thursday. Around 43 million calls changed hands, Cboe Global Markets data showed. WSJ A more detailed look at global markets courtesy of Newsquawk APAC stocks traded mostly higher after the positive handover from Wall St where sentiment remained underpinned amid encouraging data and as yields continued to decline following the recent dovish Fed pivot, while the region also digested mixed Chinese activity data. ASX 200 was led higher by the commodity-related sectors after gains in oil and metal prices which helped the index shrug off the latest flash PMIs from Australia which slightly improved but remained in contractionary territory. Nikkei 225 was lifted at the open and briefly returned to above the 33,000 level amid the global risk-on mood. Hang Seng and Shanghai Comp were varied with notable outperformance in the Hong Kong benchmark amid tech strength although the mainland lagged after mixed Chinese data in which Industrial Production topped estimates but Retail Sales disappointed despite showing double-digit percentage growth, while House Prices continued to decline and attention was also on the PBoC which maintained its 1-year MLF rate at 2.50% but delivered a record net injection through the facility. Top Asian News PBoC conducted CNY 1.45tln in 1-year MLF lending with the rate kept unchanged at 2.50% for a net injection of CNY 800bln. China stats bureau spokesperson said China's economy recovers as macro policy effects kick in but added that domestic demand is still not sufficient and the economic recovery needs further consolidation. Furthermore, the spokesperson said China is to increase the intensity of macro policies and full-year development targets are expected to be achieved, while short-term adjustments in the property sector are said to be conducive for the stable and sound development of the sector in the long run. China is likely to set the 2024 GDP growth target at around 5% and is to target a budget deficit of 3% of GDP in 2024 vs. a revised ratio of 3.8% for 2023, while it may issue off-budget special bonds if the economy requires extra fiscal support, according to Reuters sources. China's MOFCOM said it determined that restrictive trade measures taken by Taiwan against it constitute trade barriers and stated that Taiwan's restrictive trade measures have caused negative impacts on relevant mainland industries and enterprises. Taiwan's government later stated they can talk anytime if China is sincere and that issues can be dealt with under WTO mechanisms as both are WTO members, while Taiwan's government also said China's trade barrier probe does not accord with the facts and called on China to stop politicking. Nio (NIO/ 9866 HK) President says tariffs from EU probe into subsidies for China-made EVs would affect sales forecasts and investments European equities, Eurostoxx50 (+0.3%), are building on yesterday's gains; though the FTSE 100 (-0.1%) marginally lags weighed on by losses in heavyweight AstraZeneca (-1.9%) European sectors have a strong positive bias; Automobiles & Parts and Basic Resources are the clear outperformers, with the former seemingly benefitting from broad-based gains within the sector, alongside strength in Renault on a buyback update; Chemicals underperform, hampered by Symrise (-9.2%). US equity futures are entirely in the green, having traded mixed in yesterday’s session; the RTY (+0.9%) continues to outperform. Top European News ECB's Muller says it is still a little early to celebrate victory over inflation; still a little bit to go to reach 2% inflation, and its still too early to talk about near-term rate cuts, according to Bloomberg. Adds, markets are a bit optimistic if they see cuts in H1. ECB's Holzmann says there was no discussion on rate cuts at yesterday's meeting; Majority said there are risks to the upside on inflation; Majority are focus on core inflation; When questioned on whether the ECB is at terminal, the chance has increased but there is a remaining chance that they haven't. ECB's Villeroy says they want to express a message of confidence and patience at the December meeting. Change to the inflation outlook was the important signal; Will bring inflation back to target by 2025; Policy transmission is slightly faster than initially expected; Next policy move should be a lowering of rates "unless surprises" ECB's Vasle says the current policy rate is to help return inflation to 2% UBS now expects ECB to deliver its first rate cut in April (prev. June) EU is to extend the trade truce with the US until after the presidential election, according to FT. Bundesbank Forecasts: HICP: 2023 6.1%; 2024 2.7%; 2025 2.5%; 2026 2.2%; GDP: 2023 -0.1%; 2024 0.4%; 2025 1.2%; 2026 1.3% CBRT Survey (Dec): Repo Rate seen at 36.65% (prev. survey 37.01%), USD/TRY seen at 29.6229 (prev. 29.9961), 12-month CPI seen at 41.23% (prev. 43.94%). End-2023 CPI seen at 65.39% (prev. 67.23%). End-2023 GDP growth seen at 4.2% (prev. 4.1%). FX The Dollar is firmer intraday as a function of the softer EUR post-PMIs, whilst the index attempts to trim the hefty post-Fed losses after the ECB and BoE struck a less dovish tone than their US peer. Antipodeans are bid intraday largely a factor of commodities gains after a higher-than-expected Chinese Industrial Output metric. EUR on a softer footing amid dismal Flash PMI data whereby France and Germany fell deeper into contraction territory, though labour unit cost pressures remain a concern. PBoC set USD/CNY mid-point at 7.0957 vs exp. 7.1132 (prev. 7.1090). Fixed Income USTs are a touch firmer on the session having moved in tandem with the EGB reaction and only paring slightly from their 112.22 peak on the Gilt move, which itself is 6 ticks shy of the contract best. EGBs are bid across the board with initial contained performance giving way to an approach of the contract high after the morning’s Flash PMI data for December. Gilts were initially bolstered by the EZ figures, but then trimmed on the regions own strong PMI data with Services continuing to prop up the economy and crucially with wage pressures still evident. Commodities WTI Jan and Brent (+0.7%) Feb futures hold a modest positive bias, in line with the broader risk tone, with prices also underpinned by firmer Chinese Industrial Output overnight. Metals trade on a firmer footing, with spot gold holding a mild positive bias keeping its sight on the USD 2,050/oz level to the upside; Base metal futures are firmer across the board after the Chinese Industrial Output data topped forecasts and reignited demand optimism for the sector. Commerzbank says OPEC+ production cuts are likely to keep the oil market in balance at the start of next year despite weaker demand; For WTI, expects price of USD 75/bbl at the end of the first quarter; USD 85/bbl in H2'24 Commerzbank sees a further price increase to USD 2150/oz for Gold in H2'24; Silver price increase to USD 30/oz by end 2024; Sees further significant upside for Copper and price recovery to USD 9200/t over the course of the year; Sees aluminium around USD 2,800/t next year. Qatar reportedly sells February-loading cargoes at discounts and lowest levels in years, according to Reuters sources. Geopolitics Israel reportedly told Washington intensive raids and the large-scale ground operation will be completed within two or three weeks, according to Al Jazeera via social media platform X. Yemen's Houthis said it carried out an operation against a Maersk cargo ship on its way to Israel and that it targeted the ship with a drone after the ship's crew refused to respond to calls from Yemeni naval forces. Furthermore, US Central Command said a ballistic missile was fired from the Houthi-controlled area of Yemen towards the international shipping lane north of Bab-El-Mandeb Strait on Thursday but there were no injuries or damage from the ballistic missile attack. US President Biden's administration sent messages to the Houthi rebels in Yemen via several channels recently warning them to stop their attacks on ships in the Red Sea and against Israel, according to Axios. US President Biden and Turkish President Erdogan discussed the importance of strengthening the NATO alliance including the importance of welcoming Sweden as an ally. Biden expressed support for recent constructive steps in the relationship between Turkey and Greece, while they discussed efforts to increase humanitarian assistance to Gaza and protect civilians and the need for a political horizon for Palestinians, according to the White House. EU agreed to open accession talks with Ukraine, while it was separately reported that Hungary’s PM Orban said Ukraine's membership in the EU is a bad decision and that talks continue on the modification of the budget. Hungary held up the deal on EUR 50bln of financing for Ukraine and EU leaders postponed the discussion to January. Furthermore, Dutch PM Rutte said he is fairly confident the EU can reach a breakthrough early next year on Ukraine financing and the EU budget revision, according to Reuters. Japan is to ban imports of Russian diamonds for non-industrial use and will impose new sanctions on Russia-related groups and individuals, according to the Foreign Ministry. Guyana and Venezuela agreed to continue dialogue on pending matters related to the territorial dispute and to avoid conflict escalation, while the sides agreed to meet again in Brazil to continue dialogue over border issues, according to St Vincent's PM. UKMTO has received reports of an incident in the vicinity of Hodeideah, Yemen US Officials say there is an almost complete halt in ship access to Israel's Eilat port, via AJA Breaking citing Axios US Event Calendar 08:30: Dec. Empire Manufacturing, est. 2.1, prior 9.1 09:15: Nov. Industrial Production MoM, est. 0.3%, prior -0.6% Nov. Manufacturing (SIC) Production, est. 0.5%, prior -0.7% Nov. Capacity Utilization, est. 79.1%, prior 78.9% 09:45: Dec. S&P Global US Services PMI, est. 50.7, prior 50.8 09:45: Dec. S&P Global US Manufacturing PM, est. 49.5, prior 49.4 16:00: Oct. Total Net TIC Flows, prior -$67.4b DB's Jim Reid concludes the overnight wrap This is my last EMR of 2023. Many thanks for reading and interacting this year and happy holidays to you and your family if you’re celebrating. Henry will be carrying on the EMR for most of next week so it’s only good bye from me. We have a 14 hour car journey today to the Alps and I still can’t hear due to the ear infection in both ears so it’s not going to be one packed with enlightening conversation. At this rate I’ll be put in the rear with poor Bronte. As it’s my last of the year I’ll add my favourite TV series of 2023 at the end. Regular readers know that I try to carve out 45-60 minutes every night when I’m home to watch TV with my wife. The last week has been with subtitles due to the above. By the way I’ve seen two of the worst films I’ve ever seen relative to the hype this year. Namely “Everything everywhere all at once” and “Barbie”. Perhaps the second one wasn’t aimed at me. Everything everywhere all at once was a good description of the last 24 hours as there were several stories operating in parallel when it came to markets, albeit slightly less confusing in nature than those in that film. On one level it was more of the same from recent weeks, with the massive rally continuing and the 10yr Treasury yield closing (3.92%) beneath 4% for the first time since July. Indeed, we’ve seen one of the sharpest 2-day declines in real yields since the height of the Covid pandemic (-42.9bps for the 5yr). Moreover, the S&P 500 (+0.26%) closed less than 2% from its all-time high last year, with the small cap Russell 2000 (+3.52% and +2.72% over 2-days) moving into bull market territory, having now risen by +22.2% from its low on October 27. So there was undoubtedly a lot of good news. But after the wave of euphoria following the Fed meeting, neither the ECB nor the BoE offered the same dovishness with their own decisions, which led markets to row back a bit on the chances of aggressive rate cuts next year. Then we had another batch of decent US data, which led to further questions about how soon the Fed would be able to cut rates. So even though expectations are still far more dovish than before the Fed’s decision, yesterday saw a mild pushback, albeit nothing that was able to break the astonishing market rally we’ve seen into year-end. Starting from the top, the day began with the dovish narrative in the ascendancy, with European bonds seeing a massive rally at the open as they caught up with the Fed’s decision the previous day. And then in the morning, the Swiss National Bank kept rates on hold and dropped the wording in their statement about possible future hikes. But then we heard from the Bank of England, who struck a much less dovish tone in their own statement. Specifically, they held rates at 5.25%, and three of the nine members on the committee were still in favour of another 25bp hike. The statement also said that monetary policy would “need to be sufficiently restrictive for sufficiently long”, so there wasn’t an equivalent nod to rate cuts like we had from the Fed. Governor Bailey himself pushed back on market expectations, saying that “we are more cautious because we need to see those more persistent elements of inflation, which we see in things like services prices, turn in the right direction quite decisively .” Shortly afterwards, the ECB then announced their own decision, where they kept rates on hold as widely expected. But as with the BoE, they didn’t echo the more dovish stance from the Fed, and President Lagarde said that “we should absolutely not lower our guard” and that “we did not discuss rate cuts at all”. Alongside that, the ECB also announced that they would reduce the PEPP portfolio by €7.5bn per month on average over H2 2024, and discontinue reinvestments under PEPP by year-end 2024 . Nevertheless, the ECB did acknowledge the better inflation picture, dropping the wording from previous statements that inflation was set “to stay too high for too long”. Their latest forecasts also expect weaker inflation, with headline inflation now seen falling to 2.7% in 2024 (vs. 3.2% in September ). Looking further out, they even saw inflation falling below target to 1.9% in 2026, but core inflation was still seen at 2.1% then. But even with the downgrades, our European economists see the updated inflation forecasts as too high, with a meaningful downgrade likely by the March meeting. They see the hawkish tilt of yesterday’s meeting as reducing the risk of the ECB cutting as soon as March, but retain their view of rate cuts starting in April with 150bp of cuts by the end of next year. See their reaction note here. Despite the more hawkish tones from the ECB, sovereign bond yields still fell in Europe yesterday, as the impact of the Fed’s dovishness at the open outweighed Lagarde’s remarks. For instance, yields on 10yr bunds (-6.4bps) initially fell as low as 2.02% intraday, before recovering to end the session at 2.11%. That was echoed elsewhere, with yields on 10yr OATs (-7.0bps) and gilts (-4.6bps) both closing at their lowest in months. The largest yield decline came for BTPs (-13.9bps), as the delayed and gradual reduction in PEPP reinvestments was favourable for sovereign spreads. The Fed’s impact was evident across other asset classes too, as the STOXX 600 (+0.87%) closed at a 22-month high, and the iTraxx Crossover (-24.4bps) saw its biggest daily move tighter since March . Whilst central banks helped to push back on the European yield moves, the rally in US Treasuries showed little sign of stopping yesterday. Indeed, the 10yr Treasury yield was down a further -9.5bps to 3.92%, though they did rise slightly during the latter half of the US session, having traded as low as 3.88% near the European close, and this morning they’re up another +2.2bps to 3.94%. The 10yr real yield saw an even larger decline of -13.9bps, which builds on the move after the Fed meeting, and brings the 2-day decline to -34.4bps in the 10yr real yield. So this is a substantial easing in financial conditions, and US HY spreads (-29bps) are also at their tightest since April 2022, whilst Bloomberg’s index of US financial conditions is now at its most accommodative this morning since the Fed began hiking rates in early 2022 . That optimism carried over into other risk assets, with the S&P 500 (+0.26%) posting a 6th consecutive advance, which left the index at a fresh all-time high in total return terms. It also means the index is still on track for a 7th consecutive weekly advance, which would be the first time that’s happened since 2017. Small-cap stocks led the gains, with the Russell 2000 advancing +2.72%, following on from its +3.52% gain the previous day. So maybe some rebalancing going in the small caps’ favour after the FOMC. Tech stocks posted ‘only’ a slight increase (NASDAQ +0.19%), while banks were an outperformer within the S&P 500, up +4.15%. The risk-on mood was also positive for commodities, with the Bloomberg commodity index (+2.27%) posting its strongest daily gain in over a year, whilst oil prices (Brent +3.16% to $76.61/bbl) are now on course to avoid an 8th consecutive weekly decline . Whilst that was happening, we had another round of positive data on the surface from the US. For instance, retail sales surprised on the upside in November, with the headline number up +0.3% (vs. -0.1% expected). However downward revisions meant that retail control (which feeds into GDP) netted out in line with expectations. Back to the positives, weekly initial jobless claims fell back to 202k over the week ending December 9 (vs. 220k expected). Next stop will be the December flash PMIs today from the US and Europe, which are one of the last major pieces of data before Christmas. Overnight the initial releases have shown signs of improvement from November, with Japan’s composite PMI back into expansionary territory at 50.4, whilst Australia’s composite PMI picked up to 47.4, from 46.2 last month. Equity markets in Asia have continued the positive momentum overnight, as the PBoC offered commercial lenders a net 800bn yuan of 1yr loans. However, the data from China has been a bit more mixed, with industrial production up +6.6% year-on-year in November (vs. +5.7% expected), whilst retail sales were beneath consensus at +10.1% year-on-year (vs. +12.5% expected). Against that background, the H ang Seng (+2.18%) is leading gains in the region, with the Nikkei (+0.76%) and the KOSPI (+0.70%) also posting a strong advance. However, the CSI 300 (-0.15%) and the Shanghai Composite (-0.39%) have both lost ground. Looking forward, US equity futures are pointing to modest gains, with those on the S&P 500 (+0.06%) and the NASDAQ 100 (+0.09%) both advancing. To the day ahead now, and data releases include the global flash PMIs for December, and in the US there’s industrial production and capacity utilisation for November, along with the Empire State manufacturing survey for December. Central bank speakers include the ECB’s Holzmann, Centeno, Vasle, Kazimir, Muller, Scicluna, Simkus and Vujcic, along with BoE Deputy Governor Ramsden and Bank of Canada Governor Macklem. Tyler Durden Fri, 12/15/2023 - 08:19.....»»

Category: blogSource: zerohedgeDec 15th, 2023

Would The US Intervene To Defend Guyana"s Oil?

Would The US Intervene To Defend Guyana's Oil? By Gregory R. Copley, Editor, GIS/Defense & Foreign Affairs. Venezuela’s revival of its border dispute with the Cooperative Republic of Guyana may provide an opportunity for the AUKUS pact - Australia, United Kingdom, United States - to reverse or challenge the gains of the People’s Republic of China (PRC), Russia, Iran in South America and the Caribbean. The territorial dispute over the Essequibo region of Guyana extends back to 1840, ostensibly resolved with the Paris Arbitral Award of 1899, but was revived with the discovery of massive energy reserves off its coast in the early 21“ Century. This was exacerbated by Venezuela and its allies in 2022-23 for a variety of reasons, and in ways that broke with years of bilateral and multilateral agreements and negotiations between the two states. The US Southern Command has the new dispute on its radar, and the UK Government and the Commonwealth have been stirred into action. Southern Command, as of early December 2023, had begun conducting joint flight operations with the Guyana Defense Forces, sending a message to Venezuela. And US Secretary of State Antony Blinken told Guyana Pres. Mohamed Irfaan Ali that the US would support “Guyana's sovereignty and our robust security and economic cooperation”. Venezuelan Pres. Nicolas Maduro criticized Guyana for involving the United States, even knowing this was an inevitable consequence of the Venezuelan military build-up on Guyana's border. As well, several major US energy corporations have a stake in the outcome, given their participation in one of the largest new petroleum fields in the world. And yet it is Beijing and Tehran that have worked with the Venezuelan Government to escalate the crisis to the point of conflict in order to pull US forces away from build-ups in the Indo-Pacific which challenge, separately, the PRC's People's Liberation Army (PLA) expansion, and Iran's security as Israel and the US move against Iranian military adventurism. The PRC has for the past few years worked consistently to keep US and UK forces locked into the Euro-Atlantic, and has benefited from the Russia-Ukraine war, the Hamas-Israel war, and the feints of PRC basing in the Atlantic, along with attempts to push Argentina into threatening war again over the Falkland Islands. The prospect of US and UK military engagement to support Guyana is real, and while it does indeed promise to keep their forces out of the Pacific —to the benefit of the PRC — it also offers a chance for the UK to demonstrate its commitment to a Commonwealth ally and for the US, in particular, to clear the PRC's influence out of the Caribbean basin, where it has become pervasive. It could also be a test of the AUKUS alliance in that Australia would need to show that it is as committed to the Alliance's interests outside the Indo-Pacific as well as in it and that it recognized that the alliance's conflict with the PRC was, indeed, global. The sudden re-emergence of the prospect of imminent military conflict, then, between Venezuela and neighboring Guyana is more a reflection of the broader strategies of the People's Republic of China (PRC) and Iran, rather than a reflection of the 1899 Paris Arbitral Award it claims to be. Yes, there is a genuine component of Venezuelan nationalism and competition for territory now that Guyana's on and gas reserves in the disputed region are known to be among the most significant in the world. The fact that Venezuela faces a Presidential election in 2024 is also significant and requires Pres. Maduro campaigned on nationalist lines and the promise that the new energy coveries would revive the economy. But Venezuelans know that the extensive national energy reserves — largely heavy petroleum rather than the light crude of the new Guyana deposits — have been poorly managed by the Maduro Government and have yielded little to the Venezuelan voters. Venezuela, even by its Central Bank estimates, has inflation running at more than 280 percent a year in 2023, although that figure understates the real hollowing of the national economy. In the midst of all this, Guyana Pres. Mohamed Irfaan Ali and Venezuela Pres. Nicolàs Maduro on December 10, 2023, agreed to meet in St. Vincent and the Grenadines on December 14, 2023, to discuss the issue of the disputed territory in the Essequibo region — after considerable pressure from Brazil, the Caribbean Community (CARICOM), and the Community of Latin American and Caribbean States (CELAC). The matter is already before the International Court of Justice (ICJ), and Pres. Irfaan Ali (People's Progressive Party/Civic) said that he would abide by the ICJ ruling and that he would not succumb to threats from Venezuela. Pres. Irfaan Ali, on December 12, 2023, wrote to Dr. Ralph Gonsalves, the Prime Minister of St. Vincent and the Grenadines, to firmly outline the discussions set to take place in Kingstown, St. Vincent, in which the Guyana President expected that CARICOM would stand by its support for Guyana, and reiterating that the talks would not be about a resolution of the border claims by Venezuela, noting that these had already been arbitrated, and that there was no valid dispute over the offshore territorial waters of Guyana, referencing the Stabroek Block, some 120 miles offshore Guyana (and therefore within its exclusive economic zone/EEZ). The issues of the actual case, however, are secondary to the global geopolitical reality that both the PRC and Iran have been seeking to remove US and Western military pressures on them. The PRC has been seeking to keep the US, in particular, engaged in the Euro-Atlantic space and unable to deploy forces to the Indo-Pacific, and has thus supported the ongoing conflicts between Russia and Ukraine, Israel and HAMAS, and has attempted to prod Argentina into reviving a military threat to Britain's continued possession of the Falkland Islands in the South Atlantic. In the Venezuela-Guyana context, the PRC and Iran, along with Russia, are the primary allies of Venezuela, and have been clearly preparing for some time to push the Guyana land claim to the point of conflict, including the postulated Venezuelan military invasion of the Essequibo region of Guyana. Venezuelan troops are already deployed on the border of the 159,500 (61,600 sq.mi). Essequibo region, which is on the western bank of the Essequibo River, splits Guyana. It is in the offshore territorial waters and economic zone which relate to the Essequibo region that US oil producer ExxonMobil has discovered 11.4-bn barrels of oil in the area since 2015, making it one of the largest finds of the 21st Century. The oilfields of the offshore Stabroek block produce over 500,000 barrels daily. And ExxonMobil is just one of the petroleum companies exploiting the Guyanese oilfields off Essequibo. Exxon owns 45 percent of Stabroek; Hess, which Chevron is buying, owns another 35 percent; the PRC's CNOOC holds the remaining 20 percent. The PRC would fare well, possibly better than now, if the Essequibo landgrab (and seagrab) was successful for Venezuela, but the US companies would be at risk. Logically, then, the US Government would be seen to be forced to defend Guyana's position, if only in order to protect US economic interests. Venezuela itself has more than 300 billion barrels of oil reserves, but this is now dwarfed by its previously insignificant neighbor. Venezuelan State oil company PDVSA theoretically has the expertise to exploit the Stabroek block, but would need investment. Its nationalization of the energy industry has also meant that its energy management has become a political tool, generating funds for the military by not the nation. Venezuela could count on some expertise coming from U.S. oil companies, such as Chevron itself which operates with PDVSA, exporting an average of 124,000 barrels per day from Venezuela. So the situation becomes complex. In Venezuela’s 2024 Presidential election, Maduro was slated to compete with Maria Corina Machado, an economic conservative and member of the opposition party in the Venezuelan National Assembly. But Machado has been disqualified from holding public office because of her support for U.S. sanctions against the Maduro Government. The U.S. Government has said that sanctions would not be lifted unless the opposition parties could participate in elections. While Maduro’s election victory would be seen as hollow if there was no credible opposition candidate, it is questionable whether the PRC, Russia, and Iran would be disheartened if Maduro resisted U.S. sanctions threats. They (and Caracas) anticipate that Venezuela would, in the future, be able to trade within the new trading bloc outside the U.S. dollar zone, and as part of the enlarged BRICS (Brazil, Russia, India, China, South Africa) group. The growth of the non-dollar trading bloc has been largely a result of national leaders wanting to remain outside the threat of U.S. sanctions, a trend that has largely seen the end of the efficacy of sanctions as a viable weapon in U.S. strategic warfare. Tyler Durden Fri, 12/15/2023 - 05:00.....»»

Category: blogSource: zerohedgeDec 15th, 2023

What Would Happen If The US Stopped Supporting Ukraine?

What Would Happen If The US Stopped Supporting Ukraine? Authored by Connor O'Keefe via The Mises Institute, Over the weekend, border-policy negotiations between Senate Democrats and Republicans fell apart. The talks were meant to firm up Republican support for the president’s massive $105 billion military support proposal ahead of Wednesday’s vote by including additional funds for border security in the spending package. Now, with no imminent approval of further aid to Ukraine, hawks in government and the media are trying to stoke panic about what will happen if Kyiv is cut off from US support. In a letter to Congress Monday, White House budget director Shalanda Young told Congress the funds will dry up by the end of the year: I want to be clear: without congressional action, by the end of the year we will run out of resources to procure more weapons and equipment for Ukraine and to provide equipment from U.S. military stocks. There is no magical pot of funding available to meet this moment. We are out of money—and nearly out of time. Young goes on to forecast disaster for Ukraine if more money isn’t allocated. But is that really accurate? Are the Ukrainian people doomed if Washington stops funding the war? If we’re going to understand what might happen in the absence of US involvement in Ukraine, we must first understand Washington’s actual effect on the war, the true nature of which has been laid out brilliantly in a series of recent columns by Ted Snider. Russia’s invasion of Ukraine began with a bombardment of cruise missiles on February 24, 2022. Later that day, infantry and armored divisions rolled in from Russia, Belarus, and Crimea while paratroopers dropped in around the capital city of Kyiv. Days later, as the shock and confusion of the initial offensive began to dissipate, Ukrainian president Volodymyr Zelensky attempted to set up indirect talks with Russian president Vladimir Putin. Zelensky called then–Israeli prime minister Naftali Bennett and asked him to contact Putin and to serve as a mediator. Bennett agreed. Over the next week, Bennett had a series of phone calls with Putin before traveling to Moscow and Berlin to help organize diplomatic communication channels. His effort culminated in a March 10 meeting between the Russian and Ukrainian foreign ministers in Turkey. In the series of talks that followed, Bennett described both sides as making “huge concessions” in pursuit of a ceasefire. But Kyiv’s Western backers were resistant to the truce. At a special summit on March 24, NATO decided not to support or approve the peace negotiations. Still, Zelensky and Putin kept at it. And on March 29, the two sides reached an agreement. According to a draft unsealed this past June, Russia had agreed to pull its forces back to prewar boundaries. In exchange, Ukraine had agreed it would not seek NATO membership. So why didn’t it happen? Well, it may have started to. In early April, Russia withdrew its forces from northern Ukraine, around Kyiv—an action Putin later said was related to the Istanbul agreement. But then, according to Bennett, former German chancellor Gerhard Schröder, Turkish foreign minister Mevlüt Çavuşoğlu, and the leader of the Ukrainian delegation to the talks, David Arakhamia, the West pressured Zelensky to abandon negotiations and fight. Assuming the best intentions, it’s possible officials in Washington and Brussels believed the Ukrainians could win enough battles to improve their leverage in future negotiations. But that is not what happened. Instead, Washington bankrolled a horrifying twenty-one-month war of attrition that has cost the people of Ukraine greatly in land, lives, and limbs. After talks broke down, Russia laid permanent claim to tens of thousands of square miles of Ukrainian territory that it had earlier agreed to relinquish. Last summer, Ukrainian forces began attempting to retake this land by force in the so-called counteroffensive. But they have since lost more territory than they have gained. Ukraine keeps its casualty count classified, but by the end of August US estimates had put it north of two hundred thousand. And it has likely climbed substantially with the ongoing struggle to break through heavy Russian minefields. As their supply of military-aged men has dwindled, the average age of a Ukrainian soldier has climbed to forty-three. And now there is a push within the Ukrainian government to lower the draft age to begin conscripting those who have so far been too young to be eligible. The Ukrainian people are being put through hell. And now even senior Ukrainian military officials admit there is no military path out. If the purpose of stifling the Istanbul agreement was to help the Ukrainians gain more leverage, the West must admit failure before Ukraine loses even more. And if Washington’s intentions were more nefarious—as comments from officials like Mitch McConnell, who have framed the war as an easy way to burden Russia without spilling American blood, suggest—that’s all the more reason to call off this horrific project. That brings us back to the original question. What would happen if the United States stopped supporting Ukraine? We already know. Ukraine and Russia would work toward a deal. It won’t go as well for Ukraine as it did almost two years ago when they were stronger. But it’s not a path to fear. Because the alternative is that the White House gets its way and this brutal, unnecessary war carries on. And that’s so much worse. Tyler Durden Wed, 12/13/2023 - 02:00.....»»

Category: worldSource: nytDec 13th, 2023

Futures, Bonds Drop Ahead Of Jobs Report

Futures, Bonds Drop Ahead Of Jobs Report US equity futures and bonds both dropped after a tech-fueled advance in the previous session, while the dollar and oil gained in what were small moves ahead of the November jobs report while will provide more information on whether the labor market is cooling fast enough to bring the Federal Reserve closer to cut rates as soon as March (full payrolls preview here). As of 7:55am ET, S&P futures dropped 0.1%, erasing a part of Thursday's rally while Nasdaq futures dropped 0.3%.  Treasury 10-year yields approached 4.2%, rising for a second day. The dollar was little changed as the Japanese yen weakened, paring its biggest gain since January, while the Canadian dollar reversed four sessions of losses to edge higher. Oil futures rose 1.5% from the lowest closing level since July. In macro, the day's big event is the jobs report where consensus expects a 183K print and unemployment remaining flat at 3.9% In premarket trading, Broadcom shares edged 0.8% higher as analysts note that strength in AI computing is helping offset a slowdown in chips. The company, which supplies chips to Apple and other big tech companies, reported its slowest sales growth since since the early days of the pandemic, with corporate customers and telecom providers reining in their spending. Alcoa is down less than 1% after it was initiated at HSBC with a recommendation of hold and a target price of $29 on production growth prospects, profitability improvement initiatives, and continued progress on environmental, social and governance goals. Bluebird Bio shares rise 3.1% after Morgan Stanley upgrades the gene-therapy firm to equal-weight from underweight ahead of the likely approval of its Lovo-cel therapy to treat sickle cell disease. DocuSign shares edge 0.5% lower after the e-signature company gave a margin outlook that was seen as cautious, considering its strong third-quarter results. Eneti Inc. gains 9.5% after Cadeler A/S extended the expiration date for its share exchange offer to acquire all the outstanding shares of NETI. HashiCorp shares slump 24% as analysts cut their targets on the software company after results showed a slowdown in key metrics such as revenue from the previous quarter, stoking worries of muted growth, especially looking out to 2025. Hello Group ADRs are up 8.8%, after the China-based social networking platform reported third-quarter results that beat expectations and gave a forecast. Lululemon shares drop 2.7% after the activewear company’s fourth-quarter revenue guidance failed to meet consensus expectations. Jefferies said the results and guidance show a “peak has been reached,” while Wells Fargo noted the debate over demand trends in North America has not been resolved. Microsoft shares slip 0.7% after UK’s Competition and Markets Authority said it was seeking views on whether the software giant’s partnership with OpenAI should be probed. MBIA Inc. shares surge 60%, set for a record one-day gain, after the financial guarantee insurance provider declared an extraordinary cash dividend on MBIA common stock of $8.00 per share, which totals approximately $409 million. Smartsheet shares are up 3.8%, after the software company reported third-quarter results that beat expectations and raised its full-year forecast. Friday’s payroll report will be crucial in determining whether bets on dramatic Fed policy easing next year are justified — or have gone too far. Buoyed by signs that inflation and wage growth are cooling, traders have ignited bets that cuts of 125 basis points are in store over the next 12 months. Conflicting data may raise doubts, and Fed officials are likely to keep reminding the market that they are in no hurry to ease. Economists’ median estimate for November nonfarm payrolls change is +183k, with crowd-sourced whisper number +175k; Citi strategists see the 10-year straddle priced for ~11bp move for the day. Our full preview of the jobs report can be found here, and here is what Wall Street banks expect today: 238,000 - Goldman 225,000 - Barclays 220,000 - UBS 215,000 - Wells 210,000 - SocGen 200,000 - BofA 200,000 - HSBC 200,000 - Morgan Stanley 195,000 - Citigroup 161,000 - Bloomberg Economics 150,000 - JP Morgan Chase 130,000 - Deutsche Bank Below are some hot takes from Wall Street strategists: Tom Essaye, founder of The Sevens Report newsletter: “Keeping things simple, the key to today’s jobs report is whether it refutes the expectation for a March rate cut or reinforces it. A ‘too hot’ number will refute that March rate cut expectation and stocks and bonds will likely drop, while a ‘Goldilocks’ number will reinforce expectations for a March cut and stocks should rally.” Liz Young, head of investment strategy at SoFi: “It’s clear that things are turning in the labor market, even if only a little bit. There’s been a subtle, but noticeable turn upward in the unemployment rate, and a steady grind higher in continuing jobless claims. For now, we welcome the turn of events. The most important problem to solve, however, will be cooling it enough to balance things out, but not too much that it destroys the situation. Cool it off, but don’t freeze it.” Win Thin, global head of currency strategy at Brown Brothers Harriman & Co.: “There should be some payback for the strike-depressed October reading but it’s not clear how much.  While there have been some signs of softness in the labor market, it remains remarkably robust.” Jose Torres, senior economist at Interactive Brokers: “The jobs report is likely to provide additional indications of the labor market softening, a welcome sign for employers who have faced challenges with wage pressures and staffing with the right candidates. Its impact on markets, however, will depend on whether investors view the data as a stepping stone to a March rate cut and soft landing, or an adverse effect on consumer spending and a sharper economic slowdown.” A survey by BMO strategists found investors inclined to take a more bearish view on Treasuries after the jobs report, with 38% disposed to sell on an upside surprise vs 22% long-term average, 43% to buy on a downside surprise vs 49% norm Meanwhile, according to BofA's Michael Hartnett, stock markets will suffer in the first quarter of 2024 as a rally in bonds would signal sputtering economic growth; he said lower yields were one of the main catalysts of equity gains in the current quarter. However, a further drop toward 3% would mean a “hard landing” for the economy. The narrative of “lower yields = higher stocks” would flip to “lower yields = lower stocks,” Hartnett wrote. European shares advance and are on course for a fourth straight week of gains. The Stoxx 600 adds 0.6% and is within striking distance of the July highs, led by consumer product, travel and energy shares. Luxury stocks were among the best performing shares across European stock markets on Friday after China’s Politburo pledged to strengthen the government’s fiscal measures, bolstering efforts to stabilize growth in a key market for the sector.  “Luxury goods are bouncing hard, helped by this morning’s absence of the usual daily sell-side bearish commentary plus Politburo’s fiscal support headline,” said Carl Dooley, head of EMEA trading at TD Cowen. “Our China exposed basket has been ripping over the past month, with European luxury goods now playing catch up,” Dooley added. Shares in LVMH, Richemont and Hermes contribute to over 12% of the rise of the pan-European Stoxx 600 index. Watches of Switzerland rises +4.7%, Salvatore Ferragamo +2.9%, Moncler +2.4%, Kering +2.7%, LVMH +2.4% and Richemont +1.7%. Here are some other notable premarket movers: Adyen and Nexi rise after Citi upgrades them to buy, having become constructive on the payments sector for the first time in two years, noting “undemanding” valuations for the companies J Sainsbury climbs as much as 3.7%, hitting its highest level since January 2022, after being upgraded to buy at Goldman Sachs, which said the grocer has improved its market share momentum Vivendi rises as much as 4.7% on Friday following the announcement that the French media conglomerate would rejoin Paris’s CAC 40 blue chip index, reaching May highs Anglo American falls as much as 7.3%, the most since March, after the miner gave volume guidance for 2024 to 2026 that analysts say missed consensus estimates across the board DNB falls as much as 3.2% and Handelsbanken as much as 1.9% after the lenders were downgraded to sell and neutral, respectively, at UBS in a review on the Nordic banking sector Imperial Brands shares fall as much as 2.6% after the tobacco company was downgraded to sector perform at RBC Capital Markets following a sizable outperformance relative to peer BAT Siemens Energy falls as much as 6.3% after JPMorgan cuts the German firm to underweight, seeing no clear way of realizing the premium implied by a sum-of-the-parts valuation of its diverse portfolio Epiroc falls as much as 3.2% after JPMorgan downgraded the Swedish mining equipment maker to underweight from neutral, citing elevated consensus estimates and overall valuation Alstom and Stadler Rail both drop after the rail equipment companies saw their respective ratings cut at JPMorgan, seeing unfavourable risk-reward ratio in the latter Earlier in the session, Asian equities swung in a narrow range as major technology stocks rallied while Japan reeled from a strengthening in the yen. The MSCI Asia Pacific Index was on track to end a streak of three weekly gains. Toyota and Sony were among the biggest drags Friday as chipmakers TSMC and Samsung gained. Japanese stocks slid after the yen surged by the most against the dollar in almost a year on bets the Bank of Japan will end negative interest rates as early as this month. The currency move soured the outlook for the nation’s exporters. Hang Seng and Shanghai Comp just about shrugged off the early indecision amid a lack of fresh drivers with the downside cushioned after the PBoC conducted a net liquidity injection for the first time this week. Japan's Nikkei 225 underperformed amid pressure from a firmer currency after speculation that the BoJ could exit NIRP sooner than thought with markets pricing around a 20% chance they could lift rates at the December meeting, while a downward revision in Japan’s Q3 GDP to a deeper annualised contraction of -2.9% also clouded over the risk tone. Australia's ASX 200 finished marginally higher in choppy trade as weakness in financials and tech was offset by resilience in the commodity-related sectors including energy after confirmation of early merger talks between Woodside Energy and Santos to form an AUD 80bln Australian gas giant. Indian stocks posted their biggest weekly surge in 17 months as local shares climbed to new all-time highs after the nation’s central bank raised economic growth forecast. The S&P BSE Sensex Index rose 0.4% to close at record high of 69,825.60 in Mumbai on Friday, while the NSE Nifty 50 Index advanced 0.3%. For the week, the gauges posted a rise of 3.5% each, their biggest weekly advance since July 2022. The Reserve Bank of India raised its growth projection for the fiscal year ending March to 7% from 6.5% — higher than most economists’ predictions. In FX, the Bloomberg Dollar Spot Index steadied and Treasury yields rose 2-3bps across the curve, as traders awaited key US labor market data for signs over when the Federal Reserve may start cutting rates. The kiwi is the worst performer among the G-10’s, falling 0.3% versus the greenback. USD/JPY is little changed at ~144.20. USD/JPY pared a fall to trade slightly higher at 144.43; Thursday saw the Japanese yen clinch its biggest one-day gain since January CAD/USD reversed four sessions of losses to rise as much as 0.2% to 0.7368, as the Canadian dollar led Group-of-10 gains against the greenback USD/SEK and EUR/SEK rose, after GDP data showed an unexpected uptick in Swedish economic activity in October In rates, treasuries fall, with US 10-year yields rising 3bps to 4.18% and 10Y futures near session low and Thursday’s low ahead of November jobs report release at 8:30am New York time, 10-year note. Bunds and gilts have seen steeper declines.  US yields higher by 2bp to 4bp across the curve with move led by belly, flattening 5s30s spread by around 1bp on the day; 10-year around 4.18% is ~3bp cheaper on the day, bunds and gilts by an additional 2.5bp and 3.5bp in the sector. US economic data includes November jobs report (8:30am) and December preliminary University of Michigan sentiment (10am) In commodities, oil prices advanced, with WTI crude futures rising 1.4% from lowest closing level since July to trade near $70.30. iron ore rose to its highest since February as steel mills in China replenish depleted inventories in anticipation of stronger consumption next year. It’s been a wild week for lithium in China, as the country’s newest commodities exchange tried to quell a frenzy of speculation that’s fueling violent price swings for the battery material. Bitcoin (-0.2%) and Ethereum (-0.4%) both traded marginally lower after both hitting 2023 highs overnight. Looking to the day ahead now, and data releases include the US jobs report, along with the University of Michigan’s preliminary consumer sentiment index for December. Otherwise, central bank speakers include the ECB’s Muller. Market Snapshot S&P 500 futures little changed at 4,589.75 STOXX Europe 600 up 0.4% to 470.84 MXAP down 0.2% to 161.19 MXAPJ up 0.6% to 501.02 Nikkei down 1.7% to 32,307.86 Topix down 1.5% to 2,324.47 Hang Seng Index little changed at 16,334.37 Shanghai Composite up 0.1% to 2,969.56 Sensex up 0.4% to 69,797.30 Australia S&P/ASX 200 up 0.3% to 7,194.92 Kospi up 1.0% to 2,517.85 German 10Y yield little changed at 2.23% Euro down 0.2% to $1.0775 Brent Futures up 2.2% to $75.68/bbl Gold spot up 0.0% to $2,028.65 US Dollar Index up 0.24% to 103.79 Top Overnight News Stocks rose while bonds slipped Friday as traders awaited a pivotal US jobs report for more evidence of whether the labor market is cooling fast enough for the Federal Reserve to cut interest rates. A monthly Bureau of Labor Statistics report due Friday is set to show the US unemployment rate edged higher in November as the economy began to slip into a recession, according to Bloomberg Economics. European Union finance ministers are still scrambling to find an agreement on new fiscal rules for the bloc. Market participants have overplayed recent comments by Bank of Japan Governor Kazuo Ueda and his deputy, as there is no reason to believe the central bank will scrap its negative interest rate early, according to a former executive director. China funds accepted the lowest yields in at least a decade and a half in an auction of long-tenor government bonds, shrugging off Moody’s Investors Service decision to cut the country’s credit outlook. A more detailed look at global markets courtesy of Newsquawk APAC stocks eventually traded mostly higher but with gains limited as sentiment remained cautious heading into the incoming US NFP jobs report and after the recent BoJ speculation. ASX 200 finished marginally higher in choppy trade as weakness in financials and tech was offset by resilience in the commodity-related sectors including energy after confirmation of early merger talks between Woodside Energy and Santos to form an AUD 80bln Australian gas giant. Nikkei 225 underperformed amid pressure from a firmer currency after speculation that the BoJ could exit NIRP sooner than thought with markets pricing around a 20% chance they could lift rates at the December meeting, while a downward revision in Japan’s Q3 GDP to a deeper annualised contraction of -2.9% also clouded over the risk tone. Hang Seng and Shanghai Comp just about shrugged off the early indecision amid a lack of fresh drivers with the downside cushioned after the PBoC conducted a net liquidity injection for the first time this week. Top Asian News Australia's Treasurer announced a new policy statement with the RBA in which the RBA board and the government agreed that a flexible inflation target is an appropriate framework for achieving price stability with the goal for consumer price inflation kept between 2%-3%. RBA board will set monetary policy so that inflation is expected to return to the mid-point of the target with the appropriate timeframe for this to depend on economic circumstances, while the RBA will publish detailed forecast data and assumptions including the Cash Rate. Furthermore, once the new monetary policy board is operational, it will publish an unattributed record of votes and will convene and engage with an expert advisory group on monetary policy to provide the board with a wide range of external views. RBI kept the Repurchase Rate unchanged at 6.50%, as expected, while it maintained its stance of remaining focused on the withdrawal of accommodation in which 5 out of 6 members voted in favour of the policy stance. RBI Governor Das said the Indian economy is resilient and has momentum, while he noted broad-based easing in core inflation but added that inflation could see an uptick in November and December. Furthermore, he stated that the target of 4% CPI has yet to be reached and they have to stay the course on inflation, as well as noted that monetary policy has to stay alert about shocks getting generalised and has to remain actively disinflationary with the need to remain vigilant and ready to act. RBI's Das says the MPC will be highly alter to any signs of derailing in the ongoing disinflation process, will take appropriate action to get inflation to target China's Politburo says it will continue to implement proactive fiscal policy in 2024, and prudent monetary policy; will improve resilience and security of industrial supply chains, will expand domestic demand. China says monetary policy is to be flexible; drops the "forceful" wording, according to Bloomberg Fitch has upgraded Vietnam to BB+; outlook stable European equities (Eurostoxx50 +0.5%) are on firmer footing with outperformance in the CAC 40 (+1.1%) with Luxury propping the index. European sectors are generally in the Green; Consumer Products & Services is the top performer, with Luxury names the main beneficiaries whilst Basic Resources lags following a trading update at Anglo American (-6.7%). US equity futures hold around the unchanged mark awaiting direction from the US NFP Report; though the Russell (+0.3%) is slightly firmer, following price action in Europe. Top European News Fitch said major UK banks are resilient to the economic backdrop and underpinned by strong buffers, while it added that the performance of major domestically focused UK banks will remain sound over the next two years. Italy's Treasury said it is to sell up to EUR 6bln in BTP bonds at auction on Dec 13th. EU Economic Commissioner Gentiloni says there is not fiscal deal despite progress, as some legal aspects need to be clarified. Confident an agreement can be reached. Spanish Finance Minister Calvino says they will convene an extraordinary EcoFin meeting to conclude a deal on EU fiscal rules French Finance Minister Le Maire says they now have an agreement rate of 95% on fiscal rules; on Thursday said they were around 90% Spain's Economy Minister Calvino has been appointed as head of the EIB, via El Pais Bank of England/Ipsos Inflation Attitudes Survey - November 2023: Median expectations of the rate of inflation over the coming year were 3.3%, down from 3.6% in August 2023. FX The Dollar remains within a tight range in the run-up to the day’s highlight, the US jobs report ahead of next week’s FOMC confab. The Yen has come off recent highs with USD/JPY back on a 144.00 handle at the time of writing (vs yesterday’s 141.70 trough). Antipodeans are mixed with the AUD and CAD narrowly outperforming amid the strength in oil and base metals whilst the NZD sits as the G10 laggard, although with no obvious catalyst aside from AUD/NZD flows. PBoC set USD/CNY mid-point at 7.1123 vs exp. 7.1427 (prev. 7.1176) Recent softness in consumption has presented itself as a source of concern for BoJ policymakers who are "eyeing" an exit from easy policy, according to Reuters sources Fixed Income USTs are currently lower by 11 ticks with fresh macro drivers non-existent as participants position themselves for the November NFP report, ahead of Tuesday’s CPI and thereafter the FOMC meeting begins. Bunds fell to a 134.91 low which brings into play the 134.55 trough from Wednesday; a move without fresh catalysts. Gilt action is relatively pronounced, it remains well within recent bounds and as such the accompanying pressure to the SONIA strip has thus far only managed to bring December back to unchanged being fully priced. Commodities WTI and Brent (+1.5%) futures are posting notable gains making back some of the losses seen this week; though the complex has come off best levels in recent trade with catalysts limited. Metals are mixed with precious metals flat pre-NFP with spot Gold around the USD 2,030/oz level; Base metals are firmer across the board amid improving demand from China following the recent PMI and trade data. Iraq’s oil minister said the country renewed its support for the OPEC+ agreement and commitment to voluntary cuts. EU is to give member states the power to block Russian gas imports, according to FT. Sanctions on ships with Russian oil will not affect Indian purchases; adequate vessel available to import Russian crude; dip in oil prices will help India buy more oil from Russia, according to an Indian government source. EU is said to be considering restarting the WTO case against the US over steel tariffs, according to Bloomberg sources; final decision yet to be taken. Russia's Kremlin says Russian President Putin and Iranian President Raisi discussed integration and cooperation within OPEC+ on Thursday Geopolitics Israel agreed to a US request to open the Kerem Shalom border crossing for screening and inspection of humanitarian aid into Gaza, according to a US official cited by Reuters. UAE asked the UN Security Council to vote on Friday morning on a draft resolution demanding an immediate humanitarian ceasefire in Gaza, according to diplomats cited by Reuters. White House said they are not close to another deal for a pause in the Israel-Hamas conflict and the US is still trying to get more information on Hamas hostages. US Secretary of State Blinken said attacks in the Red Sea are unacceptable and they believe attacks are being carried out with the support of Iran, according to Al Jazeera via social media platform X. US State Department said it welcomes the release of Armenian and Azerbaijani soldiers, while it added that Secretary of State Blinken looks forward to hosting Azerbaijani and Armenian foreign ministers in Washington for the next round of peace talks soon. At least three rockets targeting the US embassy in Baghdad's Green Zone were fired at dawn on Friday, landing on the outskirts of the district housing government and diplomatic buildings, according to an Iraqi security official cited by AFP "Israeli army: We hit several targets inside Syria after firing shells towards the Golan Heights", according to Al Arabiya Kremlin when asked about idea US wants Russia to engage in peace talks with Ukraine on Kyiv's terms in 2024, says it is "absolutely unrealistic" US Event Calendar 08:30: Nov. Change in Manufact. Payrolls, est. 30,000, prior -35,000 Nov. Change in Private Payrolls, est. 158,000, prior 99,000 Nov. Change in Nonfarm Payrolls, est. 183,000, prior 150,000 Nov. Unemployment Rate, est. 3.9%, prior 3.9% Nov. Labor Force Participation Rate, est. 62.7%, prior 62.7% Nov. Underemployment Rate, prior 7.2% Nov. Average Weekly Hours All Emplo, est. 34.3, prior 34.3 Nov. Average Hourly Earnings YoY, est. 4.0%, prior 4.1% Nov. Average Hourly Earnings MoM, est. 0.3%, prior 0.2% 10:00: Dec. U. of Mich. Sentiment, est. 62.0, prior 61.3 Dec. U. of Mich. Current Conditions, est. 68.5, prior 68.3 Dec. U. of Mich. Expectations, est. 57.0, prior 56.8 Dec. U. of Mich. 1 Yr Inflation, est. 4.3%, prior 4.5% Dec. U. of Mich. 5-10 Yr Inflation, est. 3.1%, prior 3.2% DB's Jim Reid concludes the overnight wrap Risk assets put in a solid performance over the last 24 hours, with the S&P 500 (+0.80%) bouncing back after 3 consecutive declines, whilst US HY spreads reached their tightest levels in over 18 months. Those advances have helped to ease financial conditions considerably over recent weeks, and Bloomberg’s index for the US now stands at its most accommodative level since September. Nevertheless, we’re about to enter a pivotal week ahead, since the US jobs report is out today, and that’s being followed next week by the US CPI, as well as the final Fed and ECB decisions of 2023. So with speculation about rate cuts continuing to mount, we could soon have a much better sense of how likely those are to arrive. In terms of today’s jobs report, our US economists are forecasting a +130k gain in nonfarm payrolls, which in turn would leave the unemployment rate unchanged at 3.9%. Both will be in focus, since nonfarm payrolls have slowed considerably since the start of the year, and last month saw the unemployment rate hit its highest since January 2022, so there’ve been several signals that the labour market is softening. See here for their full preview and details of how to sign up to the webinar after the report. One thing to watch out for in the jobs report is what it means for the Sahm Rule. In previous cycles, the Sahm Rule signalled that a recession was underway if the three-month average of the unemployment rate was 0.5pts above its minimum over the previous 12 months. As of last month, that measure stood 0.33pts above its recent minimum of 3.5%, so is moving closer to levels that have previously been consistent with recessions, and is now two-thirds of the way to 0.5pts. However, since the measure is based on a 3-month average of the unemployment rate, it wouldn’t be triggered today even if the unemployment rate were to be at 4.0% in this month’s report. Another area we’ve been watching are the Temporary Help Services category of payrolls. That’s been on a broadly downward trajectory in recent months, and has a track record as a leading indicator in previous cycles. Ahead of the report, yesterday we had the latest weekly jobless claims, which showed initial claims were at 220k over the week ending December 2. That was in line with expectations, and leaves the 4-week average broadly in line with recent levels, at 220.75k. Moreover, the continuing claims for the week ending November 25 were down to 1.861m (vs. 1.91m expected), which reverses most of the sharp uptick over the previous week. In response to the jobless claims data, yields on US Treasuries initially spiked, but pared back some of that increase over the rest of the day. By the end of the US session, those on 10yr Treasuries were up +4.6bps to 4.15%, whilst the 2yr yield was flat at +0.3bps to 4.60%, with both closing 3-4bps below their peaks early in the day. This came as investors remained confident about the prospect of rate cuts next year, with futures pricing in a 66% chance of a cut by March as of this morning. It’s a similar story at the ECB as well, with investors pricing in a 75% chance of a cut by March. So next week’s meetings will be crucial to see if central bank officials push back on that assessment. Speaking of those meetings, one thing to keep an eye on today will be the University of Michigan’s survey, where long-term inflation expectations will be in focus after hitting a 12-year high of 3.2% last month . For equities, there was a strong performance in the US, with the S&P 500 rising +0.80% as the Magnificent 7 (+2.13%) led the gains once again. The tech outperformance included a +2.79% gain for the Philadelphia semiconductors index and a +5.31% rise for Alphabet, amid renewed investor optimism over AI after Google’s release of its new AI model the previous day. However in Europe it was a different story, with the STOXX 600 (-0.27%), the DAX (-0.16%) and the CAC 40 (-0.10%) all posting modest declines. That risk-off tone in Europe was evident in sovereign bond markets too, and yields on 10yr bunds fell another -0.8bps to 2.19%, marking a fresh 7-month low, whilst yields on 10yr OATs (-1.1bps) fell to an 8-month low of 2.73% . Overnight in Asia, the focus remains on Japan, and yesterday saw the Japanese Yen strengthen by +2.21% against the US Dollar as speculation mounted that the Bank of Japan could soon end its negative interest rate policy. That its biggest daily gain since January, and this morning it’s up another 0.22% to 143.84 against the dollar, despite the news that the Japanese economy contracted by more than previously thought in Q3. For instance, GDP contracted at an annualised pace of -2.9%, up from -2.1% in the preliminary reading, which marks the economy’s biggest quarterly contraction since Q2 2020 during the pandemic. Nevertheless, markets are pricing in a 29% chance that the BoJ will move away from negative interest rates at its meeting on December 19, and the Nikkei (-1.89%) has continued to lose ground. Elsewhere in Asia, the picture is more positive overnight, with gains for the Hang Seng (+0.32%), the CSI 300 (+0.41%) and the Shanghai Comp (+0.36%), whilst the KOSPI (+1.02%) has seen an even larger advance. Looking forward, US equity futures are basically flat ahead of the jobs report, with those on the S&P 500 down -0.03%. There was little other data yesterday, although we did get German industrial production for October, which fell by -0.4% (vs. +0.2% expected). That was the 5th consecutive monthly decline, which is the first time that’s happened since the height of the financial crisis in 2008-9. We also had the final print of euro area Q3 GDP confirm a -0.1% quarterly decline, with details of release pointing to slowing wage growth, as compensation per employee slowed to 5.2% year-on-year in Q3 from 5.4% in Q2 (with the latter revised down from 5.6% previously). So the print has added to signs of labour market moderation for the ECB. To the day ahead now, and data releases include the US jobs report, along with the University of Michigan’s preliminary consumer sentiment index for December. Otherwise, central bank speakers include the ECB’s Muller. Tyler Durden Fri, 12/08/2023 - 08:16.....»»

Category: smallbizSource: nytDec 8th, 2023

Futures Drop As Torrid November Rally Fizzles Ahead Of Jobs Data Deluge; China Stocks Hit Five Year Low

Futures Drop As Torrid November Rally Fizzles Ahead Of Jobs Data Deluge; China Stocks Hit Five Year Low US equity futures, most European bourses and Asian markets as well as global bonds all retreated after five consecutive weeks of gains, as traders paused to digest November’s blockbuster rally and to consider the case for interest rate cuts, which they aggressively priced in after Powell's "not as hawkish as feared" fireside chat on Friday. As of 8am ET, S&P futures were lower by 0.3%, dropping back below the 4,600 unwinding a portion of Friday session rally (which however left hedge fund bruised and battered as the most shorted stock soared much more than the HF VIP basket); USD is stronger and commodities are weaker: crude futures are lower by around 0.4%, adding to Friday losses; 10-year Treasury yields added five basis points to 4.25%. Despite the rise in the DXY, Bitcoin surged past $41,000, while gold briefly touched an all time high. With the Fed in its blackout window, the macro data releases will be the key focus; no treasury auctions this week. Today, that focus is on factory orders and durable/cap goods; this week we get a deluge of labor data starting with the latest reading on US job openings (or JOLTS) tomorrow, followed by ADP’s National Employment Report on Wednesday and non-farm payrolls on Friday. In premarket trading, Spotify shares rose 1.7% after the company said it will reduce headcount by about 17%, at least the third time this year the streaming service has cut jobs. Roche Holding AG gained after the Swiss drugmaker agreed to buy Carmot Therapeutics Inc. for as much as $3.1 billion in a deal that would give it access to experimental medicines in obesity and diabetes. Cryptocurrency-linked stocks rallied in premarket trading on Monday as Bitcoin extends gains to surpass the $42,000 mark, its highest level since April 2022. Shares of Hawaiian Airlines shares soared 181% after rival Alaska Air agreed to purchase the carrier for $1.9 billion. Here are some other notable premarket movers: Carvana rose 4.5% after JPMorgan upgraded the online used-car dealer to neutral from underweight. The broker said the upgrade reflects improvements in “productivity, costs, and culture.” Lululemon shares decline 2.0% after Wells Fargo downgraded the athletic-apparel brand to equal-weight from overweight, noting the valuation is “no longer cheap.” The broker also removes the stock from their Top Picks list, replacing it with Nike. Uber Technologies, Jabil and Builders FirstSource all rise in premarket trading as the companies are set to join the S&P 500 Index. Virgin Galactic fell 14% after Richard Branson told the Financial Times that he doesn’t plan further investments in the space tourism startup he founded. A slew of economic reports this week culminating with Friday's jobs report are expected to shed light on the state of the US labor market and whether markets are prematurely excited that softer economic conditions can open the door to Federal Reserve rate cuts. Soft-landing hopes built on an economy at “stall speed” look fragile, leaving the market open to risks of a deeper contraction, JPMorgan strategists led by Mislav Matejka warned in a note, although they have been saying the same thing for so long nobody cares any more. Optimism around a peak in interest rates pushed the 10Y  TSY yield down 60 basis points in November from a 16-year high of 5% the previous month, and brought a gauge of the securities into positive territory for the year. The S&P 500 advanced about 9%, one of its best November rallies in a century. “While yield declines were warranted, the magnitude is too big given the recent data releases,” said Piet Christiansen, chief strategist at Danske Bank. “I think the market is too aggressive about rate cuts.” As noted on Friday, bond traders doubled down on wagers that the Federal Reserve will cut interest rates as soon as next March even after Fed Chair Jerome Powell reiterated it’s premature to speculate on easing. Late last week, the swaps markets saw an 80% chance of a reduction in March and are fully pricing in a cut in May; March odds have since eased modestly. Those bets are set to be tested tomorrow, with the latest reading on US job openings (or JOLTS) for October. That report will be followed by ADP’s National Employment Report on Wednesday and non-farm payrolls on Friday. “Still-robust demand and labor-market dynamics in the US” should keep traders wary that inflation can keep cooling, according to Barclays Plc strategists including Ben McLannahan. “Further falls in inflation will be more difficult from here,” they wrote in a report. European stocks reversed earlier gains, trading about 0.1% lower as oil stocks underperformed most sub-sectors on Europe’s Stoxx 600 index. The Stoxx Europe 600 Energy index drops as much as 2% after Citi cited pressure on oil prices coming from more spare capacity and UBS flagged demand concerns. Citi analysts including Alastair Syme expect further oil price easing to low $70s by end-2024 in the face of growing spare capacity. The mining sector was the biggest underperformer amid falling iron ore prices. Here are Monday’s biggest movers: Rolls-Royce shares gain as much as 4.1% as JPMorgan upgrades the plane-engine maker to overweight and Goldman Sachs reinstates its buy rating, adding to a chorus of bullish views UCB rises as much as 7.8% after it announced that the EU has granted marketing authorization for Zilbrysq (zilucoplan) as an add-on to standard therapy for generalized Myasthenia Gravis Wolters Kluwer rises as much as 4% and hits new all-time high. The German software and services provider is set to join the Euro Stoxx 50, replacing UK gambling firm Flutter 888 shares gain as much as 18% after the Sunday Times reported Playtech made an unsuccessful £700 million ($890 million) bid in July for the William Hill owner DS Smith gains as much as 2.7% after Barclays upgraded its recommendation for the UK paper and packaging firm to overweight, calling it “one of the cheapest stocks in global packaging” ITM Power jumps as much as 13% after the clean-fuel company reiterated its FY guidance. Analysts welcomed its update, which contrasts with recent profit warnings from sector peers Nokia shares fall as much as 4.1% amid speculation that the telecom equipment maker could be removed from AT&T’s 5G equipment vendor list; rival Ericsson meanwhile gains as much as 2.7% European mining stocks fall as much as 2% as iron ore prices drop after inventories rose and the steel market moved into the typically slower winter season across northern China IMCD slips as much as 2% after JPMorgan cut its rating, noting that it doesn’t see earnings of chemical distributors’ in 2024 being “positively levered” to a possible macro recovery Earlier in the session, Asia’s equity benchmark dropped, led by losses in Chinese and Hong Kong stocks as investors looked for fresh catalysts after a strong rally in November. Indian equities headed for a fresh record after Prime Minister Narendra Modi’s victories in three key state elections boosted expectations of policy continuity. The MSCI Asia Pacific Index declined 0.2%, after rising as much as 0.7% earlier. Stocks in Japan slid as the yen strengthened while Chinese shares extended declines. China Evergrande rallied 9% in Hong Kong after the distressed developer won breathing room to strike a restructuring agreement with creditors. That wasn't enough to help boost Chinese stocks, however, and the CSI 300 Index closes down 0.7% at the lowest level of 2023 - which was also a fresh 5 year low - on Monday.. ... as traders remain concerned about the health of the world’s second-largest economy despite Beijing’s recent push to shore up the market. Hang Seng and Shanghai Comp traded indecisively as PBoC Governor Pan’s repeated support pledges were offset by a substantial net liquidity drain and geopolitical frictions in the South China Sea, while attention was also on Evergrande’s windup hearing which the Hong Kong court adjourned to January 29th to give the Co. some breathing space to work on its restructuring proposal. Australia's ASX 200 was higher with gains led by the yield-sensitive sectors such as tech and real estate, while gold miners were boosted after the precious metal initially surged above USD 2,100/oz and printed a fresh record high before fading the majority of the early spike. Japan's Nikkei 225 lagged and briefly approached the 33,000 level to the downside with pressure from recent currency strength. Putting today's weakness on context, Asian stocks headed into December on the back of a 7.7% rally last month, their best monthly gain since January, as investors pile into bets that the Federal Reserve may cut interest rates by mid next year. Optimism also remains that China will continue its policy support for its struggling economy. Historically, regional equities tend to have a quiet December with average rise in the past 10 years seen at around 0.9%, according to data compiled by Bloomberg.   In FX, the Bloomberg Dollar Spot Index rose 0.2% reversing part of Friday's steep losses. The Swiss franc is one of the worst performers, falling 0.5% versus the greenback after data showed inflation slowed more than expected in November. In rates, Treasuries are cheaper with losses led by the front-end and belly across the curve, flattening 2s10s and 5s30s spreads. There is no strong catalyst for price action according to Bloomberg analysts, as Treasuries follow similar bear flattening across German curve, unwinding a portion of Friday’s sharp rally. US yields cheaper by up to 6bp across front and belly of the curve with 2s10s, 5s30s spreads flatter by 1.2bp and 4bp on the day; 10-year yields around 4.245%, cheaper by 5bp on the day and lagging bunds and gilts by 5bp and 2bp in the sector. Focus on the session includes factory orders, while Fed speakers are now in a self-imposed quiet period ahead of Dec. 13 policy announcement. The Dollar IG issuance slate is empty so far; this week’s issuance forecast is $15b to $20b, with bond sales expected to be front-loaded with Monday anticipated to be the busiest day of the week. No coupon issuance scheduled for this week with next Treasury auctions being next week’s 3-, 10- and 30-year sales. In commodities, oil prices extended their recent CTA-driven decline, with WTI falling 0.5% to trade near $73.70. Meanwhile, European natural gas prices declined amid persistent low demand for the fuel kept supplies intact. Benchmark futures fell as much as 4.9%, breaking two consecutive days of gains for the contract. Gold surpassed $2,130 an ounce before giving up gains for the day. Bitcoin climbed past the $41,000 level to the highest since April 2022. US economic data includes October factory orders, durable goods orders at 10am. Fed members are now in self-imposed black-out period for speaking ahead of Dec. 13 policy announcement Market Snapshot S&P 500 futures down 0.3% to 4,588.00 STOXX Europe 600 down 0.3% to 465.03 MXAP little changed at 161.80 MXAPJ up 0.1% to 503.65 Nikkei down 0.6% to 33,231.27 Topix down 0.8% to 2,362.65 Hang Seng Index down 1.1% to 16,646.05 Shanghai Composite down 0.3% to 3,022.91 Sensex up 2.1% to 68,881.89 Australia S&P/ASX 200 up 0.7% to 7,124.65 Kospi up 0.4% to 2,514.95 German 10Y yield little changed at 2.37% Euro little changed at $1.0877 Brent Futures down 1.3% to $77.88/bbl Gold spot up 0.2% to $2,075.57 U.S. Dollar Index little changed at 103.29 Top Overnight News Defaults by Chinese borrowers have surged to a record high since the outbreak of the coronavirus pandemic, highlighting the depth of the country’s economic downturn and the obstacles to a full recovery. A total of 8.54mn people, most of them between the ages of 18 and 59, are officially blacklisted by authorities after missing payments on everything from home mortgages to business loans, according to local courts. FT ALK (Alaska Air) said it would buy HA (Hawaiian Holdings) for $18/shr. in cash in a deal worth $1.9B (including ~$900M of net debt), a significant premium to HA’s Fri close of $4.86/shr. BBG US goods deflation is in place and will likely continue for the foreseeable future (given that supply chains are back to normal while monetary tightening curbs demand), a trend that should help bring overall inflation back to the Fed’s 2% target as soon as the second half of 2024. WSJ Israel expanded its offensive, with a ground invasion of southern Gaza expected. A US Navy ship responded to a flurry of drone and missile attacks against commercial ships in the Red Sea. The US said it’s working to restart hostage release negotiations. BBG A Hong Kong judge has delayed a decision on Evergrande’s liquidation, an unexpected move that gives the Chinese property developer until next month to come up with a restructuring plan that satisfies its creditors. FT Indian refiners have resumed Venezuelan oil purchases through intermediaries, with Reliance (RELI.NS) set to meet executives from state firm PDVSA next week to discuss direct sales following the easing of U.S. sanctions on the South American country. RTRS Speaker Johnson has proven to be a surprisingly staunch supporter of Washington providing more financial aid to Ukraine. WSJ US corporate profits are beginning to rebound, a trend that could help prevent the US from experiencing a recession. WSJ Spotify is preparing to cut 17% of its workforce, or about 1500 people, as the company looks to bolster margins and profitability. WSJ A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded mixed with an initial positive bias after last Friday’s gains on Wall St owing to a decline in yields amid increased Fed rate cut bets for next year despite the pushback from Fed Chair Powell, although the upside was capped in the region after quiet macro newsflow from the weekend and ahead of this week’s key events including central bank rate decisions and a slew of data releases. was higher with gains led by the yield-sensitive sectors such as tech and real estate, while gold miners were boosted after the precious metal initially surged above USD 2,100/oz and printed a fresh record high before fading the majority of the early spike. lagged and briefly approached the 33,000 level to the downside with pressure from recent currency strength. Hang Seng and Shanghai Comp traded indecisively as PBoC Governor Pan’s repeated support pledges were offset by a substantial net liquidity drain and geopolitical frictions in the South China Sea, while attention was also on Evergrande’s windup hearing which the Hong Kong court adjourned to January 29th to give the Co. some breathing space to work on its restructuring proposal. Top Asian News Chinese Center for Disease Control and Prevention requested that the elderly and patients with underlying diseases and children avoid public gatherings, while it advised the public to wear masks in crowded places such as public transportation. It also stated that some public cultural venues, museums and indoor attractions can implement measures to avoid high density of people. PBoC Governor Pan reiterated a pledge to defend the housing market's healthy operation and said China's financing structure needs to be improved, while he vowed to handle actions disrupting market order and vowed low-cost funding aid to affordable home projects. BoJ’s Noguchi said Japan has yet to achieve a wage-driven rise in inflation and said they must see price rises backed by sustained wage increases to achieve the 2% price target, according to Reuters. A bombing attack killed four people and wounded several others in the Philippines’ southern city of Marawi City in Mindanao, while it was later reported that Islamic State claimed responsibility for the bombing. China’s internet companies including Didi (DIDIY), Tencent (700 HK/ TCEHY) and Alibaba (9988 HK/ BABA) are reportedly drawing complaints amid growing system failures; industry experts call for strengthened oversight, according to Global Times European equities are mixed, Eurostoxx50 -0.2%, with trade ultimately choppy throughout the session. The FTSE 100, -0.5%, underperforms, largely hampered by losses in Basic Resources and Energy. European sectors are mixed with Retail and Media to the upside, though the overall breadth of the market is narrow; Basic Resources and Energy are the main underperformers, largely a factor of losses in base metals and lower oil prices respectively. Stateside futures are trading on the backfoot, ES -0.3%, amid a mixed risk tone in European trade; with the RTY, +0.3%, outperforming. Top European News ECB’s Nagel said it is way too early to declare victory over inflation and noted that inflation in the Eurozone will carry on declining in the months ahead but at a slower pace, according to Kathimerini. ECB's de Guindos says recent inflation data is good news and it has been a "positive surprise"; too early to declare victory. Riksbank Minutes: monetary policy has reduced demand in the Swedish economy and contributed to an easing of inflationary pressures; monetary policy needs to remain contractionary, however, it is now appropriate to leave the policy rate unchanged. Bremen says In my overall monetary policy assessment, the prospects for inflation and economic activity weigh more heavily than the continued weak krona. German Economic Minister Habeck cancelled his COP28 trip to focus on budget talks. French Interior Minister said one person died and two were injured from an attack by a suspect on tourists, while the suspect was said to be motivated by the Gaza situation and was on the French security services watch list, as well as known for psychiatric disorders. S&P affirmed France at AA; Outlook Negative and affirmed Poland at A-; Outlook Stable, while Fitch affirmed the UK at AA-; Outlook Stable, affirmed Ireland at AA-: Outlook Positive and raised Greece from BB+ to investment grade status of BBB-; Outlook Stable. FX The Dollar index has kicked off the week on a firmer footing as yields eased off Friday’s highs and risk gradually soured overnight and into early European hours. EUR/USD is slightly more cushioned vs G10 peers (ex-USD) following last week’s decline on dovish ECB commentary coupled with the softer-than-forecast regional CPI data across the bloc. Japanese Yen is now flat intraday following the notable rise on Friday on the back of narrowing rate differentials – dipping from a 148.34 high towards a 146.65 low against the Dollar. Swissy is the G10 laggard this morning following the region's CPI metrics which printed sub-forecast across the board in the release before the SNB’s quarterly decision later this month. Aussie, Loonie and Kiwi are hit by the broader risk mood, with the AUD and CAD narrowly lagging amid their commodity links. PBoC set USD/CNY mid-point at 7.1011 vs exp. 7.1271 (prev. 7.1104). Fixed Income Core benchmarks are essentially unchanged at the time of writing, and reside towards the mid-point of circa. 40 tick parameters in EGBs. Bunds were lifted to the 133.44 session peak in the wake of domestic Import/Export data, though the move proved fleeting. USTs are just over 10 ticks shy of Friday’s peak and a touch softer on the session as yields, particularly at the short-end, lift and pause for breath during the Fed blackout & pre-data. Commodities Crude futures, WTI, -0.6%, lose further ground in a continuation of the price action seen since last week’s OPEC+ meeting which ultimately underwhelmed markets as voluntary supply cuts by OPEC+ members have raised doubts about their implementation; the complex has bounced off lows though very much within ranges. Spot gold surged at the open to record levels, surpassing USD 2,100/oz before waning back to levels under USD 2,075/oz, with the rally primarily driven by traders betting on the Federal Reserve cutting interest rates early next year. US Department of Energy said on Friday that oil companies will return 4mln barrels of oil to the US SPR by February from the previous exchange and the US seeks to buy up to 3mln more barrels of oil for SPR for February delivery. US, UK and EU are to tighten compliance and increase leverage for buyers to keep getting discounted oil, while they jointly reached out to Liberia, the Marshall Islands and Panama to warn of increased circumvention of the Russian oil price cap. Kuwait Oil Company said several were injured after a limited fire broke out at an oil line, although production was unaffected. Canada’s First Quantum notified buyers that the Co. will not be able to meet agreements due to a force majeure. UBS forecasts Gold at USD 2250/oz by end-2024 Kazakhstan daily oil output recovered to 230.5k tons on Dec 3rd after falling amid CPC shipping disruptions, according to data cited by Reuters. Geopolitics: Israel-Hamas Israel’s military chief said the operation in southern Gaza will match the operation in northern Gaza where they fought strongly and thoroughly, while an Israeli military spokesman said forces are operating on the ground against Hamas centres in all of Gaza, according to Reuters. Hamas deputy chief said Israeli hostages will not be freed unless there is a ceasefire, and all Palestinian detainees are released, while the Hamas armed wing said they bombarded Tel Aviv with a barrage of missiles. A Mossad team was in Doha on Saturday for discussions with Qatari mediators on restarting the Gaza truce in which talks focused on the potential release of new categories of Israeli hostages and new truce parameters. However, it was later reported that Israeli PM Netanyahu’s office said the Mossad team was recalled from Qatar due to deadlock in negotiations over Gaza and that Hamas did not meet its obligation to free all children and women hostages on the list it approved. Israeli military spokesperson said several humanitarian trucks entered Gaza after being security cleared on the Israeli side of the border, while the spokesperson added that this will be a long war and not bound by time, according to Reuters. Israel’s army said a launch was identified from Syria towards Israeli territory and the army responded by targeting the launch site, while it was also reported that Iran said two Revolutionary Guards were killed in an Israeli attack in Syria, according to Reuters. US Pentagon said it is aware of reports regarding an attack on USS Carney and several commercial vehicles in the Red Sea, while the US said that USS Carney engaged and shot down a drone launched from Houthi-controlled areas in Yemen. It was separately reported that the Yemeni Houthi group said its navy targeted two Israeli ships although Israel’s military said the ships targeted had no connection to the state of Israel, while AFP reported that a UK-owned ship passing through the Red Sea was hit by rocket fire. US carried out a self-defence strike in Iraq against an imminent threat at a drone staging site, according to a US military official. US Vice President Harris said international humanitarian law must be respected in the Gaza war and too many innocent Palestinians have been killed, while she added that Israel has a legitimate military objective against Hamas but must do more to protect civilians. There were also comments from Secretary of Defense Austin who said protecting civilians in Gaza is a strategic imperative for Israel, as well as noted that the US will remain Israel’s closest friend and won’t let Hamas win. UK Foreign Secretary Cameron will travel to Washington D.C. on Wednesday and will conduct bilateral meetings with US Secretary of State Blinken, as well as meet congressional figures, while the focus of discussions will be support for Ukraine and to work to de-escalate tensions in the Middle East, according to Reuters. Islamic Jihad said Britain announced the participation of its air force in intelligence missions in Gaza as an effective participation in the aggression, according to AJA Breaking via social media platform X. Turkish President Erdogan said the chance for peace in the conflict is lost for now due to Israel’s uncompromising approach, while he added that Hamas is not a terrorist organisation and nobody should expect him to define them otherwise. Furthermore, Erdogan said a contact group of Muslim countries is ready to prepare a roadmap for the resolution of conflict in Gaza after talks with Western powers. Israel General says ground forces have almost completed their mission in Northern Gaza strip Other NATO Secretary General Stoltenberg said NATO should be ready for bad news from the Ukrainian front as Kyiv continues to defend against Russia’s invasion, while he added that they have to support Ukraine in both good and bad times, according to an ARD interview cited by Politico. China's military said a US combat ship illegally entered waters adjacent to the Second Thomas Shoal and that the US deliberately disrupted the South China Sea, while it added the US seriously violated China's sovereignty and undermined regional peace and stability. Philippines Coast Guard said it is to conduct patrols in the vicinity of the Whitsun Reef and it is monitoring the illegal presence of more than 135 Chinese maritime militia vessels at a reef in the South China Sea. North Korea said interference with its satellite operation would be considered a declaration of war and that North Korea would respond to any US interference in space by eliminating the viability of US spy satellites. North Korea also stated that its laws stipulate mobilisation of war deterrence if an attack against its strategic assets becomes imminent, according to KCNA. North Korea said US sanctions violate international law and that it will retaliate against the US, Japan and Australia for sanctions against its satellite launch, while it said it will take countermeasures against individuals and organisations that impose and enforce sanctions, according to KCNA. Furthermore, North Korea warned a “physical clash and war” have become a matter of time after the scrapping of a key military pact designed to reduce tensions with South Korea, according to The Telegraph. Venezuela on Sunday approved a referendum called by the government of President Maduro to claim sovereignty over an oil- and mineral-rich area of Guyana, according to AP News. Ukrainian drone attacked an oil depot within Russian-controlled Luhansk, via Ria US Event Calendar 10:00: Oct. Cap Goods Orders Nondef Ex Air, prior -0.1% 10:00: Oct. Cap Goods Ship Nondef Ex Air, prior 0% 10:00: Oct. -Less Transportation, prior 0% 10:00: Oct. Factory Orders Ex Trans, prior 0.8% 10:00: Oct. Factory Orders, est. -3.0%, prior 2.8% 10:00: Oct. Durable Goods Orders, est. -5.4%, prior -5.4% DB's Jim Reid concludes the overnight wrap All roads this week point to payrolls on Friday with the usual build up via JOLTS (tomorrow) and ADP (Wednesday). Elsewhere in the US the Services ISM is out tomorrow (we will also watch the employment sub component ahead of payrolls), and the initial read on inflation expectations in the University of Michigan confidence sentiment release (Friday) will be of note after 5-10yr expectations ticked up to a decade high of 3.2% last month. Remember the Fed are now on a blackout period ahead of next week's FOMC so some of the big catalyst for moves of late, i.e. Fed speakers, won't be there. Around the globe, other highlights include a few important releases in Germany including the trade balance (today), factory orders (Wednesday) and industrial production (Thursday). Industrial production indicators are also due in France and Italy. Retail sales data is out for the Eurozone on Wednesday. In China, the Caixin services PMI (tomorrow) and trade balance figures (Thursday) are the highlights. Tokyo CPI is out just before midnight tonight From central banks, Lagarde and Guindos speak today with the RBA (tomorrow) and Bank of Canada (Wednesday) expected to hold rates by the consensus although our economist is an outlier and predicts a hike in Australia . For the full week ahead the day-by-day calendar is at the end as usual. Digging a bit deeper into the US employment picture, our US economists expect headline and private payrolls to come in at +130k with consensus at +180k and +160k respectively. The returning post-strike autoworkers will boost the data by around +30k. Unemployment is expected to hold steady at 3.9% by DB and the consensus, although our economists see the risks tilted to a 3.8% print. One thing our economists look carefully at is the diffusion index that shows the breadth of job gains. It's currently at 52%, its lowest rate since the pandemic. They show that 70% of the private job gains in the last year come from only two sectors, namely leisure and hospitality and private education and healthcare. Outside of that job creation in the last 12 months is a very lowly 0.7% and just 0.2% over the last 6. Staying with US labour markets, the JOLTS data tomorrow is also important even if it's October data. As our economists point out, while the hiring and quits rates were at or below their 2019 averages in September, the layoffs and discharges rate remained near historical lows. So that gap is keeping labour markets tight for now. Our base case is that the demand for labour eases in the next few months. Asian equity markets are mostly trading lower as I type. The Nikkei (-0.72%), Hang Seng (-0.60%), CSI (-0.27%) and Shanghai Composite (-0.14%) are slipping while the KOSPI (+0.39%) is bucking the negative trend this morning. S&P 500 (-0.12%) and NASDAQ 100 (-0.28%) futures are also edging lower. 2 and 10yr Treasuries are back up +5-6bps this morning after a very strong rally last week as we'll see below. Gold is up just under a percent and looking set for its highest close ever and Bitcoin is up over +3% and to the highest since April last year. In stock specific news, shares of Evergrande Group rose over +9.0% as a court hearing of the world’s most-indebted property developer over its possible liquidation was surprisingly postponed to January 29, 2024. Recapping last week now, markets continued their strong performance as positive data added to growing investor confidence that the next move for central banks will be a dovish pivot. In fact, last week saw the close of the best month for a global 60:40 portfolio of equities and bonds since the positive vaccine news in November 2020. Supporting last week’s rally was encouraging inflation data on both sides of the Atlantic, an upward revision of US GDP for Q3 that showed annualised growth of +5.2% (previously +4.9%), and some dovish Fedspeak . The rally was most pronounced in fixed income. After a brief stumble on Thursday, it continued on Friday as markets proved unphased by Fed Chairman Powell’s statement on Friday that the Fed was ready to tighten if needed. Instead, markets elected to focus on his comment that policy is “well into restrictive territory”. Fed funds futures moved to price in 134bps of cuts by December 2024, up from 90bps at the start of the week. This meant that 2yr Treasury yields fell -41.1bps (and -14.2bps on Friday) to their lowest level since June. 10yr yields were down -27.1bps (-13.0bps on Friday), their sharpest weekly decline since January and hitting their lowest level since the first week of September . The stream of good news was also echoed in Europe, most notably with the November inflation numbers on Wednesday and Thursday, which saw Eurozone inflation slow to 2.4% (2.7% exp), its lowest since July 2021. With disinflation playing out faster than the ECB expected, markets raised their expectations of ECB rate cuts to price in 69bps of rate cuts by June 2024, up from 28bps at the start of last week. You can read our European economists’ take on the inflation numbers here. Off the back of this, 10yr bund yields fell -28.2bps last week (and -8.5bps on Friday) hitting their lowest level since June. The more interest-rate sensitive 2yr bund yields fell -39.0bps (and -13.4bps on Friday), to their lowest level since May. The fixed income rally boosted risk appetite, though the +0.77% weekly rise for the S&P 500 (+0.59% on Friday) was remarkably its smallest gain in five weeks. The gains were broad-based, with the NASDAQ slightly underperforming (+0.38% on the week; +0.55% on Friday) and with the Magnificent Seven mega cap index down -1.19% (-0.24% Friday). Small cap stocks enjoyed the risk-on tone after rising +3.05% last week (and +2.96% on Friday). Over in Europe, the STOXX 600 posted a solid gain of +1.35% week-on-week (and +0.99% on Friday). Finally, in commodities, gold enjoyed a strong week, soaring +3.57% (+1.73% on Friday) to a new all-time high of $2,072/oz. Meanwhile, the confirmation of OPEC+ cuts into 2024 did little to drive upward price momentum in oil, as markets remained doubtful over compliance to the new “voluntary cuts”. Brent crude fell -2.11% to $78.88/bbl, though its -4.77% fall on Friday was exaggerated by a shift in the benchmark month. WTI crude fell -2.49% to $74.07/bbl (and -1.95%% on Friday). Tyler Durden Mon, 12/04/2023 - 08:20.....»»

Category: worldSource: nytDec 4th, 2023

Futures Drop In First Trading Day Of Last Month As Powell "Fireside Chat" Looms

Futures Drop In First Trading Day Of Last Month As Powell "Fireside Chat" Looms US futures reversed some of Thursday's gains to start the final month of the year after a blowout performance in November, as European stocks gained, and Asia stuttered. US Treasuries and the dollar posted small moves before comments from Fed Chair Jerome Powell at 11am ET that may offer clues on the path of interest rates. Oil rebounded after OPEC+ promised further output cuts but was hazy on details. Israel resumed fighting against Hamas in the Gaza Strip after a weeklong truce ended: Israel’s army said Hamas violated the cease-fire terms by firing toward its territory. Bitcoin soared to its highest price so far this year. Base metals are rallying after the strong China Caixin Mfg. PMI results (50.7 s. 49.6 survey vs. 49.5 prior). Today, we get the November ISM-Mfg. at 10am ET (exp. 47.9, last 46.7) and hear from Powell at a "fireside chat" at Spelman College in Atlanta on Friday at 11am ET ahead of Fed’s blackout period. Focus for Powell events is whether he’ll back dovish comments earlier this week by Fed Governor Waller, which spurred a rally across front-end of the Treasuries curve. In premarket trading, Pfizer dropped 3.5% after dropping development of its experimental weight-loss pill. Tesla slipped 2.1% as the electric-vehicle maker kicked off deliveries of its Cybertruck. RBC said the vehicle is priced at the higher end of expectations. Here are some other notable premarket movers: Marvell Technology slipped 5% after the chipmaker’s fourth-quarter revenue forecast fell short of expectations. PagerDuty rose 5% after the company reported third-quarter results that beat expectations and raised its full-year forecast. Dell Technologies drops 5.4% after reporting revenue that declined more than expected, buffeted by continued sluggish corporate demand for personal computers. Lemonade falls 3.2% after Oppenheimer downgraded the insurance company, noting the outlook for weather patterns to return to normal in 2024 after a relatively quiet 2023. Samsara, a provider of GPS fleet tracking, gains 13% after boosting its profit and revenue guidance for the full year. UiPath jumps 14% as analysts hike their targets after third-quarter results beat expectations at the robotic process automation software company. Ulta Beauty gains 12% after the cosmetics retailer reported forecast-beating comparable sales growth in the third quarter. After we predicted one month ago to brace for a face-ripping rally in November... 1. Dealer gamma turns deeply positive 2. $5BN in daily buybacks until mid-Dec 3. CTAs buying up to $200BN in global stocks over next month 4. Hedge Funds least net long since 2011 5. Seasonals — zerohedge (@zerohedge) November 3, 2023 ... that's precisely what happened, as US stocks posted their best month in close to a year-and-a-half and had their second-best November since 1980s, defying the skeptical calls and fueling hopes that more gains are to come, while the MSCI All Country World Index saw its third-largest monthly gain in the past decade. The Bloomberg Dollar Spot Index dropped by the most in a year, while US Treasury yields tumbled about 60 basis points in the month. This was mostly down to plunging bond yields amid mounting signs that the Federal Reserve is managing to tame inflation without breaking the economy. Money-market fund assets surged to a fresh all-time high and Cathie Wood got in on the action too, with her ARKK Innovation ETF racking up a 31% gain for the month. “Almost everyone was offsides coming into November,” said Ryan Detrick, chief market strategist at Carson Group. Everyone except for our raders that is. “There’s still a big opportunity for traders to chase gains in December, too.” This morning, investors were trying to assess if November’s scorching gains across asset classes can go further. Yesterday's core PCE data showed that the Fed's favorite measure of inflation eased in October, adding to the case for an end to the Fed’s tightening and bolstering the narrative that lifted markets globally last month. Some suggest optimistic market wagers on the timing of interest-rate cuts next year read too much into recent comments by Fed officials. Powell is set to speak at Spelman College in Atlanta on Friday. "The market is wondering whether it has gone ahead of itself in expecting US rate cuts next year,” said Sébastien Barbé, head of emerging-market research and strategy at Credit Agricole. “From Powell’s point of view, it may be tempting to warn the market against excess optimism about possible rate cuts in order to keep monetary conditions tight enough to make sure disinflation is sustainable.” Meanwhile, oil prices steadied after the drop suffered yesterday following an OPEC+ meeting which sewed confusion among traders. The cartel promised further cuts to output but was hazy on the details, with the lack of a concluding press conference and final communiques leaving the market puzzled. Notably, the cuts agreed are voluntary, so whether the additional supply cuts that were announced will be delivered remains to be seen. Part of the rebound was driven by news Israel resumed fighting against Hamas in the Gaza Strip after a weeklong truce ended. Israel’s army said Hamas violated the cease-fire terms by firing toward its territory. Jets started striking Gaza soon after the deadline passed. Israel dropped leaflets telling people to leave some parts of southern Gaza. Qatar said truce negotiations continue European stocks gain in early Friday trading, with the advance led by the Stoxx 600 Basic Resources index, as mining stocks outperform after broker upgrades, with the Automotive and Food, Beverage & Tobacco sectors the worst performing. Anglo American and Rio Tinto led gains in the Stoxx 600 Index after China’s manufacturing data beat estimates. The Euro Stoxx 50 rose 0.7% with the FTSE 100 outperforming regional peers. Here are the biggest movers Friday: Mining shares outperform in Europe on Friday as Anglo American and Rio Tinto are upgraded to buy at UBS and Liberum, respectively, with Anglo American gaining as much as 7.6%, the most since September Signify shares rise as much as 6.6% after the lighting maker announced a new divisional structure and said it will implement measures to reduce non-manufacturing costs by more than €200 million Jenoptik rises as much as 5.8% after the optical systems technology firm upgraded its Ebitda margin target for 2025, citing better-than-expected organic development in its semiconductors and electronics businesses Technogym gains as much as 11% after NIF Holding bought about 8.8 million ordinary shares of the fitness-equipment maker at €9.20 apiece in a reverse accelerated bookbuilding Leonteq shares tumble as much as 18% to the lowest level since 2020 after the Swiss technology and service provider revised down its FY2023 forecast. ZKB flags that the dividend could be reduced LVMH shares fall as much as 1.9% after the luxury goods maker is downgraded to equal-weight at Morgan Stanley given the likelihood of a further deterioration in demand for the industry in the fourth quarter Viaplay shares plunge as much as 83%, the most on record, in early Friday trading. Analysts said shareholders can expect to see their holdings reduced to almost nothing under a new recapitalization plan Ceres Power shares plunge as much as 27%, the most since 2012, after the UK-based energy generator and distributor said it hasn’t been able to conclude a new license partnership in this financial year ITV shares fall as much as 2.9% after Deutsche Bank downgraded rating on the broadcaster to hold from buy, citing headwinds from a continued slump in advertising revenue Swiss Re shares fall as much as 2% as investors focus on its new reserving allowance, which is expected to have a “negative impact” of approximately $500 million on profit after tax Earlier in the session, Asian stocks fell as concerns about China’s economy persisted, with sentiment cautious ahead of comments from Federal Reserve Chair Jerome Powell later on Friday. The MSCI Asia Pacific Index dropped as much as 0.4%, led by technology shares, as some Fed officials remained wary of interest rate cuts next year. Tech-heavy markets such as South Korea and Taiwan also fell. Stocks in Japan gained as a stall in yen strength boosted exporters. Chinese shares declined, extending their recent underperformance versus global peers, with the CSI 300 Index set for its lowest close since 2019. Investors remained concerned about the weak economic recovery even as a private survey of China’s manufacturing activity unexpectedly expanded. The decline in home sales also accelerated in November despite more funding support for developers. Chinese's losses were almost erased, however, after the China Securities Journal reported that the "National Team" was back as an unidentified Chinese state institution bought exchange-traded funds whose underlying assets are A-shares issued by central state-owned enterprises in the domestic stock market Friday. Hang Seng and Shanghai Comp were gradually pressured following the PBoC’s substantial net liquidity drain, whilst the latter eventually moved into the green amid reports China state-owned capital operating Co. reportedly bought ETFs on Friday, whilst the session also saw a surprise return to expansion territory for the Chinese Caixin Manufacturing PMI. Japan's Nikkei 225 traded indecisively as encouraging data releases offset the headwinds from early currency strength. Australia's ASX 200 was dragged lower by underperformance in tech and consumer-related sectors amid higher yields. In FX, US equity futures are steady, while the dollar was slightly down ahead of speeches by the Fed’s Powell and Goolsbee. US ISM manufacturing data is also due. DKK and EUR are the weakest performers in G-10 FX, NOK and SEK outperform. In rates, Treasuries were slightly cheaper across the curve with losses led by long-end, moving inverted 2s10s spread back toward top of Thursday’s range. TSY yields are cheaper by up to 2bp across long-end of the curve with 2s10s spread wider by 0.5bp on the day; 10-year yields around 4.345% with bunds outperforming by 3.5bp in the sector, Italian 10-year by 5bp. Focus for Powell events is whether he’ll back dovish comments earlier this week by Fed Governor Waller, which spurred a rally across front-end of the Treasuries curve. Fed-dated OIS currently price in a 25bp rate cut in May and a total of 112bp cuts by the December FOMC meeting. US economic data includes November S&P Global manufacturing PMI (9:45am New York time), October construction spending and November ISM manufacturing (10am). In Europe, Italian bonds outperform following surprise drop in Italy’s manufacturing PMI for November; bund 10-year yields are down some 2 bps, outperforming comparable USTs and gilts. US session includes manufacturing data and two scheduled appearances by Fed Chair Powell. In commodities, oil pared some post-OPEC+ losses. WTI trades within Thursday’s range, adding 0.3% to trade near $76.20. Spot gold was on track for a third weekly gain, rising roughly $8 to trade near $2,045/oz as it inches toward its all-time high after Israel resumed its war against Hamas; it was then summarily smacked down by some central bank amid fears a new all time high will lead to a surge in gold to $2500 and higher and destabilize the fiat system. Most base metals trade in the green after China's Caixin Mfg PMI unexpectedly entered expansion, rising to 50.7 from 49.5, and beating estimates of 49.8; LME tin rose 1.3%, outperforming peers. To the day ahead now, and central bank speakers include Fed Chair Powell, the Fed’s Barr, Goolsbee and Cook, ECB President Lagarde, and the ECB’s Elderson and De Cos. Data releases include the global manufacturing PMIs, along with the ISM manufacturing reading from the US. Market Snapshot S&P 500 futures up 0.2% to 4,583.75 MXAP down 0.3% to 161.81 MXAPJ down 0.6% to 503.36 Nikkei down 0.2% to 33,431.51 Topix up 0.3% to 2,382.52 Hang Seng Index down 1.2% to 16,830.30 Shanghai Composite little changed at 3,031.64 Sensex up 0.7% to 67,464.96 Australia S&P/ASX 200 down 0.2% to 7,073.18 Kospi down 1.2% to 2,505.01 STOXX Europe 600 up 0.7% to 464.87 German 10Y yield little changed at 2.42% Euro little changed at $1.0898 Brent Futures down 0.4% to $80.51/bbl Gold spot up 0.6% to $2,048.93 U.S. Dollar Index down 0.17% to 103.32 Top overnight news China’s Caixin manufacturing PMI for Nov came in ahead of plan at 50.7, up from 49.5 in Oct and above the Street’s 49.6 forecast (this follows the NBS PMIs Wed night falling short of expectations). RTRS Europe’s final manufacturing PMI for Nov came in at 44.2, up from the flash reading of 43.8. BBG Ukraine president Volodymyr Zelenskyy has pushed to “accelerate” the construction of military fortifications at key points along the frontline in the east of the country where Russian forces have stepped up attacks in recent weeks. FT Israel resumed fighting against Hamas in the Gaza Strip after a weeklong truce ended. Israel’s army said Hamas violated the cease-fire terms by firing toward its territory. Jets started striking Gaza soon after the deadline passed. Israel dropped leaflets telling people to leave some parts of southern Gaza. Qatar said truce negotiations continue. BBG Washington aims to slash Russia’s oil and gas revenue by 50% by the end of the decade to ensure Putin doesn’t have the funds to attack his neighbors. FT Caracas has for over 200 years claimed rights over Essequibo, a vast swath of the territory of neighbouring Guyana. But only now has it opted to hold a referendum among Venezuelans on taking over the 160,000 sq km of land. FT PFE announces a setback in its GLP1 anti-obesity ambitions. Its twice-daily danuglipron formulation will NOT advance into P3 studies.  The drug achieved weight reductions of 8-13% over 32 weeks and 5-9.5% at 26 weeks, less than the 14-15% many thought would be needed to compete in the market. More significantly (and negatively), there were high rates of adverse side effects (up to 73% nausea; up to 47% vomiting; up to 25% diarrhea) and high discontinuation rates (greater than 50%). RTRS Apple and Paramount Global have discussed bundling their streaming services at a discount, the latest attempt by rival entertainment giants to team up as they look to make their offerings more affordable and attractive. WSJ BPCE is exploring options for its $1.2 trillion Natixis asset management business, including selling a majority stake, people familiar said. BBG A more detailed look at global markets courtesy of Newsquawk APAC stocks began the new month with price action rangebound as markets paused following the November rally amid another busy day of economic releases, while the conflict in Gaza also resumed. ASX 200 was dragged lower by underperformance in tech and consumer-related sectors amid higher yields. Nikkei 225 traded indecisively as encouraging data releases offset the headwinds from early currency strength. Hang Seng and Shanghai Comp were gradually pressured following the PBoC’s substantial net liquidity drain, whilst the latter eventually moved into the green amid reports China state-owned capital operating Co. reportedly bought ETFs on Friday, whilst the session also saw a surprise return to expansion territory for the Chinese Caixin Manufacturing PMI. Top Asian news China state-owned capital operating Co. reportedly bought ETFs on Friday, according to Bloomberg. US judge blocked the Montana state ban on Tiktok from taking effect, according to a court order. US lawmakers seek a Biden administration investigation into Chinese drone maker Autel Robotics due to national security concerns. Japan's largest trade union RENGO said it formally agreed on a 2024 pay hike demand of 5% or more, according to Reuters. European equities, Eurostoxx50, +0.5%, are extending gains; FTSE100, +0.8%, which has been lifted by mining-related stocks. European sectors are mostly in the green, with significant outperformance in Basic Resources, being propped up by mining stocks following broker upgrades at Anglo American, +6.4%, and Antofagasta, +4.7%; Optimised Personal Care & Grocery is marginally hampered by a Tesco, -1.3%, downgrade. US Futures are trading on the front foot, albeit to a lesser extent in comparison to their European counterparts ahead of ISM & Powell; RTY, +0.3%, slightly outperforms. Top European news ECB's Nagel said recent inflation developments are encouraging but the ECB cannot be satisfied yet and inflation risks are still on the upside so a further rate hike cannot be ruled out. Nagel also stated that longer-term inflation expectations are still some way from 2% and that a leaner ECB balance sheet is desirable and the reduction can accelerate, while he added it is far too early to discuss rate cuts. EU weighs concessions in the US steel feud amid concerns over a Trump return, according to Bloomberg sources. German government spokesperson, re. budget talks, says they are aware of the urgency and there is a lot of momentum to solve this as soon as possible FX Dollar drifts after month-end revival awaiting US manufacturing ISM for interim impetus before guidance from Fed Chair Powell; DXY dithering within 103.45-26 range. Kiwi back in sight of 0.6200 vs Greenback after hawkish RBNZ rhetoric from Hawkesby. Aussie encouraged by China's Caixin manufacturing PMI rebound to 50.0+ level as AUD/USD hold above 0.6600. Loonie underpinned ahead of Canadian LFS with USD/CAD sub-1.3550. Cable firm on 1.2600 handle after upward revision to final UK manufacturing PMI. Euro tethered to 1.0900 vs Dollar amidst nearby option expiries and post-mostly better than flash or forecast Eurozone manufacturing PMIs. PBoC set USD/CNY mid-point at 7.1104 vs exp. 7.1458 (prev. 7.1018). Fixed Income Debt futures back on a firmer footing, on balance, after steep month end retracement. Bunds bounce further from sub-132.00 towards 133.00 again. Gilts towards top of 96.80-25 range, but still lagging in run up to Fitch UK rating review. T-note hovering around 110-00 within 110-04/109-27+ confines awaiting US manufacturing ISM and Fed speakers headlined by Chair Powell twice. Commodities WTI and Brent are modestly firmer intraday in the aftermath of the OPEC+ confab on Thursday which ultimately underwhelmed the market given that output cuts are voluntary; as it stands, benchmarks are holding incrementally above the unchanged mark in narrow ranges around the prior session's trough. Spot gold holds an upward bias as the Dollar remains subdued; Base metals are firmer across the board amid upbeat Chinese data overnight, and upward bias in risk sentiment in Europe. OPEC Secretariat announced several OPEC+ countries will conduct additional voluntary cuts to the total of 2.2mln BPD (exp. 2.0mln). It was confirmed that Brazil will join OPEC+ from January 2024. Saudi Arabia will extend its voluntary cut of 1mln BPD to the end of Q1 2024 with its production to be approx. 9mln BPD and Russia is also to extend its voluntary cut in oil supplies until the end of Q1 2024 with its voluntary supply cut to reach 500k BPD. Kuwait is to make a further 135k BPD OPEC+ oil output cut, while the UAE is to make an additional 160k BPD OPEC+ output cut and Iraq is said to cut its production by 220k BPD in Q1. Conversely, Angola rejected its OPEC quota for 1.11mln BPD and said it will produce 1.18mln BPD, according to Bloomberg. Click here for the detailed headline. US is purchasing 2.73mln bbls of oil for the strategic reserve, according to a document cited by Reuters. US aims to halve Russia's energy revenue by 2030, while Assistant Secretary of State for Energy Resources Pyatt said Western sanctions will continue for years to come to curb Moscow's war machine, according to FT. US President Biden and Angola's President welcomed the launch of a US-Angola energy security dialogue in 2024 during a meeting on Thursday, according to the White House US State Department said the US reiterated its pledge to ‘reconsider’ the steps it took to ease sanctions on Venezuela if the latter fails to comply with certain commitments by the end-November deadline, while it added that Venezuela must define steps for lifting bans on opposition candidates and begin the release of Venezuelan political prisoners and wrongfully detained Americans. It was later reported that banned Venezuelan candidates would be allowed to take their cases to a tribunal. Morgan Stanley says commitment to new OPEC+ cuts appears to be uncertain, expect compliance to only be partial, Foresees Saudi Arabia ultimately extending the cuts to Q2-2024. Maintain Brent forecast at USD 85/bb and flat throughout 2024. Lowered OPEC+ production forecast for Q1-2024 by 0.6mln BPD, still see the oil market turning into a small surplus again in Q2 & Q3. Russia's Kremlin says OPEC+ contributes to stabilisation of energy markets and creation of conditions for supporting energy prices at a balanced level; Russia is interested in continuing working with OPEC+. First Quantum is suspending production guidance for Cobre Panama for the current year Geopolitics Israel's military said that Hamas violated the truce and fired towards Israeli territory, while it has resumed combat against Hamas in Gaza Initial reports suggested Israel and Hamas agreed to extend the truce for an eighth day, according to Egyptian officials cited by WSJ. However, there was no official statement made by Israel, Hamas or mediator Qatar. Rocket sirens sounded in Israeli areas near the Gaza border and the Israeli military said one launch was detected from Gaza which was intercepted, while Hamas-affiliated media reported that explosions and gunfire were heard in the northern Gaza Strip. Furthermore, Israeli planes were reportedly flying over Gaza and Israeli army vehicles are firing in the northwest of the Gaza Strip, according to a correspondent cited by Al Jazeera. The Israeli army raises the alert on the border with Lebanon, according to Al Arabiya Qatari and Egyptian mediators have been in contact with Hamas and Israel since fighting resumed in Gaza on Friday, according to Reuters citing sources; negotiations between both sides is continuing Senior Hezbollah member says Lebanon remain ready to confront any danger from Israel, adds Gaza developments can still affect the Lebanon situation US Treasury Department issued new North Korean sanctions targeting 8 individuals and the hacking group Kimsuky, while South Korea imposed sanctions on 11 North Korean individuals, according to the Foreign Ministry. US Event Calendar 09:45: Nov. S&P Global US Manufacturing PM, est. 49.5, prior 49.4 10:00: Oct. Construction Spending MoM, est. 0.3%, prior 0.4% 10:00: Nov. ISM Employment, est. 47.2, prior 46.8 10:00: Nov. ISM New Orders, est. 46.7, prior 45.5 10:00: Nov. ISM Prices Paid, est. 45.9, prior 45.1 10:00: Nov. ISM Manufacturing, est. 47.8, prior 46.7 Central Banks 03:00: Fed’s Barr Speaks on Bank Supervision and Regulation 10:00: Fed’s Goolsbee Participates in Moderated Discussion 11:00: Fed’s Powell Speaks in Fireside Chat 14:00: Fed’s Powell, Cook Participate in Roundtable Discussion DB's Jim Reid concludes the overnight wrap Happy December. My wife is organizing Santa's Grotto at the kids' school tomorrow and until yesterday was missing one key thing. A Santa! A call over the last few weeks for a volunteer amongst all parents and grandparents had fallen upon deaf ears so my wife rung a couple of agencies and found the cheapest Santa was £600 for 90mins work. So that's a great business to get into, although I accept the work might have a seasonal bias! Since it’s the start of December this morning, we’ll shortly be releasing our monthly performance review for November. Overall, it was a great month for markets after a run of three fairly weak ones, which has led to a big turnaround in some of the YTD numbers for 2023. In fact, it was the best month for global bonds since December 2008, the best month for US bonds since May 1985, as well as the strongest month for the S&P 500 this year. The full report will be in your inboxes shortly. Whether the trends of November continue into Xmas might in part depend on Powell’s speech later today (4pm GMT), just before the FOMC blackout. Market moves have been so great since he suggested that tight financial conditions were doing some of the Fed's job for them (November 1st) that you have to think he will address the subsequent moves and either push back or endorse. On balance I think he may take a similar tone to Williams yesterday and push back a little while acknowledging the progress that has seemingly been made . On that theme, NY Fed President Williams' remarks yesterday helped the month end on a soggier tone, especially for bonds. He said he expects “it will be appropriate to maintain a restrictive stance for quite some time to fully restore balance and to bring inflation back to our 2% longer-run goal on a sustained basis .” Separately, San Francisco President Daly said that “I’m not thinking about rate cuts at all right now”. Those developments had a notable impact on sovereign bonds, which pared back some of their recent gains on both sides of the Atlantic. For instance, the 10yr Treasury yield bounced back +7.1bps to 4.33%. Over in Europe there were slightly smaller moves for 10yr bunds (+1.5bps), OATs (+2.3bps) and BTPs (+5.5bps), while Gilts underperformed (+8.0bps) . This came even as the data generally pointed in a dovish direction. In particular, we had the latest PCE inflation data for October yesterday, which is the measure the Fed officially targets. That showed headline PCE at a monthly 0.0% (vs. +0.1% expected), which brought the year-on-year number down to +3.0%, and the lowest since March 2021. It also brings us closer to the sort of numbers where the Fed has historically pivoted towards rate cuts in the past. Core PCE was still a bit higher at +3.5%, but to be fair, the more recent figures have been better, and if you just look at the last 6 months alone, core PCE is now down to an annualised +2.5% . Over in the Euro Area, there was similarly good news from the flash CPI reading for November. It showed headline annual inflation was down to +2.4% (vs +2.7% expected) , the lowest since July 2021, and almost back at the ECB’s 2% target. This was partly down to a big negative impetus from energy prices, which are currently down -11.5% year-on-year. Core inflation remained more elevated at +3.6% but this also surprised clearly on the downside (+3.9% exp) with a marked slowdown in the past three months, down from +5.3% as recently as August. Amidst the better news on inflation, the bigger concern came from the labour market, where the latest data showed things were continuing to soften. For example, US continuing jobless claims were up to their highest level in almost two years, at 1.927m (vs. 1.865m expected). Seasonals seem to be a little all over the place this year so some caution is required. Meanwhile in Germany, the r egistered unemployment rate climbed to a two-and-a-half year high of 5.9%, so this wasn’t just a US theme. As it happens, we’re now just a week away from the final US jobs report of the year, and it was last month that the unemployment rate hit its highest since January 2022. So if it does show any further softening, that’ll only ramp up the H1 2024 rate cut speculation as we get closer to the Fed’s December meeting just a few days later . With the data softening, US equities continued their pretty flat performance this week. But a sizeable rally in the final 30 minutes of US trading, probably reflecting month-end flows, left the S&P 500 posting a decent rise (+0.38%). Bank stocks outperformed for the second day in a row (+1.03%), while a strong day for industrials led the Dow Jones index to a +1.47% gain. Tech stocks underperformed, with the NASDAQ (-0.23%) and the FANG+ index (-0.27%) dipping. Meanwhile in Europe, the STOXX 600 (+0.55%) continued its recent outperformance, closing at a two-month high . This morning Asian equity markets are drifting lower at the start of the last month of the year despite the late-day rebound on Wall Street overnight. As I check my screens, the KOSPI (-1.03%) is the biggest underperformer across the region with the CSI (-0.91%), the Hang Seng (-0.69%) and the Shanghai Composite (-0.32%) also trading in the red amid mixed economic signals from China (more on this below). Elsewhere, the Nikkei (+0.03%) is flickering between gains and losses this morning. In overnight trading, US stock futures are indicating a negative start with those on the S&P 500 (-0.06%) just below flat while those on the NASDAQ 100 (-0.19%) inching lower. Coming back to China, the Caixin PMI measure of the manufacturing sector unexpectedly expanded in November, hitting 50.7 (v/s 49.6 expected). That was the fastest expansion in three months and up from 49.5 in October. Of course, the Caixin PMI stands in contrast to the latest official PMI which dropped to 49.4, highlighting that mores stimulus will likely be required to reinvigorate growth in the world’s second biggest economy. Elsewhere, Japan’s unemployment rate edged down to 2.5% in October (v/s 2.6% expected) while the job-to-application ratio slightly went up to 1.30 after having stayed at 1.29 in the preceding three months. In a separate report, capital spending in 3Q23 advanced +3.4% y/y as expected after a +4.5% gain in the previous quarter. Elsewhere yesterday, oil prices gave up their earlier gains following the conclusion of the OPEC+ meeting. T he group agreed additional supply cuts totalling about 900kb/d on top of an existing reduction of 1,300kb/d by Saudi Arabia and Russia . However, the move was in the form of “voluntary cuts” by several OPEC+ countries rather than a more typical agreement on reduced production quotas, leaving questions over how disciplined the implementation of the supply curbs will be. WTI crude had been trading c. 2% higher on the day prior to the news but fell by more than 5% intra-day and was down -2.44% by the close at $75.96/bbl. Brent crude saw more modest swings, and was down -0.32% to $82.83/bbl yesterday. Overnight, Brent crude prices are under pressure, trading -2.61% lower to trade at $80.67/bbl on softer output cuts . To the day ahead now, and central bank speakers include Fed Chair Powell, the Fed’s Barr, Goolsbee and Cook, ECB President Lagarde, and the ECB’s Elderson and De Cos. Data releases include the global manufacturing PMIs, along with the ISM manufacturing reading from the US. Tyler Durden Fri, 12/01/2023 - 08:20.....»»

Category: blogSource: zerohedgeDec 1st, 2023