“France Plunges Deeper Into Crisis After Macron’s Premier Ousted.” “After Trying to Impose Martial Law, South Korea’s President Faces an Impeachment Vote.” “Syrian Rebels Close in on Homs as Russia Tells its Citizens to Leave Country.” “China Urges its Citizens to Leave Syria 'As Soon as Possible' as Fighting Rages.”
Another week’s developments confirm Disorder Metastasis has attained critical momentum – monetary, speculative Bubble, political and geopolitical. Might as well start with the monetary.
December 6 – Reuters (Lucy Raitano): “Investors ploughed $136.4 billion into cash in the week to Wednesday, the biggest weekly inflow since March 2023, when markets were rattled by a regional banking crisis, according to a report from Bank of America… citing data from EPFR.”
According to ICI data, Money Market Fund Assets (MMFA) surged $95.9 billion last week to a record $6.771 TN. MMFA were up $637 billion, or 30% annualized, over the past 18 weeks – with y-t-d growth of $885 billion, or 15.9% annualized. In one of history’s spectacular monetary inflations, MMFA inflated $2.212 TN, or 49%, since the Fed commenced “tightening” in March 2022, and $3.137 TN, or 86%, since the start of the pandemic (Feb. ’20).
As noted in the above Reuters article, last week’s MMFA expansion was the largest since the March 2023 banking crisis – the week ended March 15th to be exact. That bout of MMFA ballooning was associated with major liquidity injections from the Fed and FHLB. Instead of Fed and GSE balance sheet leveraging, this year’s incredible MMFA expansion correlates to an extraordinary expansion of speculative leverage. It’s worth noting that 78% ($74.5bn) of last week’s expansion – and 75% ($474bn) of the 18-week surge – are explained by growth in institutional money funds (as opposed to retail). I believe these flows have been greatly impacted by repo market “basis trade” leveraging and securities finance more generally (intermediated through institutional funds).
Leveraged speculation accelerated last year after the Fed signaled the end to rate increases, only to intensify when the Fed communicated imminent rate cuts. Things then went haywire heading into the election and following the decisive Trump win and Republican sweep. Importantly, the boom in speculative leverage and attendant liquidity abundance has been a global phenomenon.
French yields declined two bps this week to 2.88%, with spreads to German yields narrowing four to 77 bps. French sovereign CDS declined four to 36 bps. French banks SocGen and BNP Paribas CDS dropped four, with European Bank (subordinated) CDS sinking seven to 104 bps – right at the low back to September 2021. France’s CAC40 Equities Index rallied 2.7% (Germany’s DAX up 3.9% and Italy’s MIB 4.0%). How to square the week’s stellar market performance with “France Plunges Deeper Into Crisis After Macron’s Premier Ousted”?
“Britain’s ‘Truss moment’ involved a political initiative to worsen a bad budgetary situation. It coincided with a period of global financial instability, and Britain had no access to external backing. By contrast, Barnier was attempting to improve a bad budgetary situation. His fall coincides with a period of global financial euphoria. France has access to the ‘pooled insurance” that is an integral part of the euro-zone setup." Mohamed A. El-Erian, Bloomberg, December 5, 2024.
Mr. El-Erian’s cogent insight is worthy of brief exploration. Today’s “financial euphoria” has its roots in wild excess, speculative leverage and resulting liquidity overabundance, and upside market dislocation. In contrast, the “Truss Moment” erupted after an 11-week surge in UK yields from 1.86% to 4.34%, a destabilizing deleveraging-induced yield spike. Deleveraging and liquidity issues were quickly taking hold globally. Over this period, 10-year Treasury yields surged from 2.65% to 4.22%. The Fed was only seven months into a potentially problematic tightening cycle, with markets fretting about de-risking/deleveraging and a less certain Fed liquidity backstop.
Well, the Fed’s response to the March 2023 banking crisis clarified any Fed backstop ambiguity. Between the unprecedented multi-trillion pandemic monetary inflation and a “tightening” cycle calibrated to avoid “breaking” anything, market faith in central bank liquidity operations reached a new level. And now the world is into a global easing cycle. As for the Eurozone's “pooled insurance,” the ECB has dabbled with a plethora of liquidity-providing facilities, including the Transmission Protection Instrument (TPI), “to counter unwarranted, disorderly market developments if these pose a serious threat to the smooth transmission of monetary policy across the euro area.”
When Prime Minister Michel Barnier warned of an impending financial “storm”, leaders on the far right and far left scoffed and readily submitted their no confidence votes. In France and elsewhere, necessary structural reform will have to wait until it is imposed by financial market “storms” currently suppressed due to omnipresent central bank liquidity backstops. With the U.S. at the epicenter, global markets are today generally over-liquefied and dysfunctional.
Years of “whatever it takes” ensure powerful Bubble dynamics, including extremely loose financial conditions and speculative markets conditioned to revel in aggressive risk-taking. After all, high-risk developments ensure shorting, hedging, and tantalizing squeeze opportunities. Those that had hedged French risk this week found themselves with the same bullseye on their backs as hedgers in U.S. markets and globally. And nowhere are excessively loose conditions more conspicuous than with “core” U.S. markets. The Fed sees things differently.
Fed Governor Christopher Waller: “I believe the evidence is strong that policy continues to be significantly restrictive, and that cutting again will only mean that we aren’t pressing on the brake pedal quite as hard.”
Federal Reserve Bank of New York President John Williams: “I expect it will be appropriate to continue to move to a more neutral policy setting over time.”
Federal Reserve Bank of San Francisco President Mary Daly: “Whether it’ll be in December or some time later, that’s a question we’ll have a chance to debate and discuss in our next meeting, but the point is we have to keep policy moving down to accommodate the economy.”
Additional accommodation risks overheating. November Nonfarm Payrolls were somewhat above forecast at 227,000, with a notable 0.4% gain in Average Hourly Earnings (4.0% y-o-y). Job Openings (JOLTS) jumped about 370k to 7.519 million. University of Michigan Consumer Confidence (current conditions) surged a much stronger-than-expected 15 points to an eight-month high of 77.7. November auto sales were stronger-than-expected at the highest level (16.5 million annualized) since June 2021. October Consumer Credit was almost double forecasts at $19.2 billion, the strongest reading since July. And early data point to a robust holiday shopping season.
December 6 – Bloomberg (Andrea Felsted): “Here’s a holiday riddle for retailers: Can Black Friday ever be too good? Americans pulled out their credit cards en masse during what is now a multi-day shopping bonanza stretching from Thanksgiving to Cyber Monday. Some 197 million US consumers shopped over the five days, according to the National Retail Federation and Prosper Insights & Analytics, ahead of initial expectations of 183.4 million… While in-store spending on Black Friday was broadly flat compared with last year, online was up 14.6%, according to Mastercard SpendingPulse. The strong digital trend continued over the weekend, with spending from Nov. 26 to Dec. 2 up 7% in the US, according to Salesforce.”
The Atlanta Fed GDPNow Forecast has increased to 3.29%. This is up from Q3’s 2.8% GDP print, continuing an acceleration from Q1’s 1.6% - and would be the strongest growth since Q3 '23’s 4.4%.
Fed officials asserting “significantly restrictive” surely realize it’s a weak argument. They want to cut rates, and I’ll assume they’re increasingly uncomfortable with wide international interest-rate differentials. Markets are pricing 28 bps of additional ECB rate reduction next week to 2.89%. The euro traded last week to a two-year low, with vulnerability and disorder at the periphery (i.e., Europe, China, and EM) risking a destabilizing dollar spike.
On the subject of disorder, one of the more interesting articles of the week comes from the Financial Times’ Leo Lewis: “South Korea’s Tumult is a Symptom of China-US strife - As the Globalisation-Friendly World Order Fades, its New Geoeconomic Course is Fraught with Risk.”
“Korea is also a concentrated illustration of the often zero-sum impact of China’s rise, and of its capacity to rapidly and savagely destabilise the certainties of earlier times. If Tuesday’s madness was, via the process that installed the outsider Yoon in the first place, a pathology of deepening public despair at the capacity of politics to solve the big issues, China is among the reasons that many of those issues seem so intractable. In economic terms, Chinese companies and their steady ascent up the value chain now mount a formidable challenge in areas such as semiconductors, white goods, consumer electronics and automotive. This is tough for everyone, but these are sectors that have been disproportionately responsible for Korea’s industrial miracle, and thus disproportionately pain-inducing.”
“Public despair at the capacity of politics to solve the big issues.” It’s a world of metastasizing big issues beyond the capacity of even the most competent government officials. President Trump campaigned on the premise that there wasn’t an issue he couldn’t solve in short order. He’ll have his hands full with today’s rapidly deteriorating geopolitical landscape.
“‘It’s a tectonic shift,’ said Andrew Tabler, a senior fellow at the Washington Institute for Near East Policy... ‘Regional and international powers intervened in Syria over a decade ago, and now the conflicts of Ukraine, Gaza and Lebanon all come together and overlap in Aleppo.’” (from WSJ’s Yaroslav Trofimov).
December 6 – Washington Post (Robyn Dixon): “The lightning advance of rebels in Syria and their rapid capture of the cities of Aleppo and Hama are threatening one of Russian President Vladimir Putin's proudest achievements, his 2015 military intervention to prop up Bashar al-Assad's regime. Almost a decade later, however, Moscow is embroiled in a massive land war in Europe and analysts question whether it has the resources to save Assad again… ‘We are in constant dialogue with our Syrian friends, with Damascus,’ Kremlin spokesman Dmitry Peskov said... ‘And depending on the assessment of the situation, it will be possible to talk about the degree of assistance that is necessary for the Syrian authorities to cope with the militants and eliminate this threat.’ At risk here is not just Russia's prestige but its prized military foothold in the eastern Mediterranean region: The naval base of Tartus and, further north, the Hmeimim Air Base…”
The stunning rebel advance through Aleppo, on to Hama and to the outskirts of Homs.
“‘If Homs were to fall, Damascus would be cut off from the coast, effectively severing what would remain of regime rule into two,’ said Charles Lister, a senior fellow and director of the Syria program at the Middle East Institute.” (From the Washington Post’s Bryan Pietsch)
December 6 – Financial Times (Malaika Kanaaneh Tapper and Polina Ivanova): “Russia’s embassy in Damascus has warned its citizens they may need to leave Syria as rebel forces approach the strategic city of Homs, with the regime’s struggle to slow the militants’ rapid offensive spiraling into a deepening crisis for Bashar al-Assad. Russia, which has been supporting Assad’s government by targeting the rebel forces with air strikes, said its citizens could leave the country on commercial airlines via accessible and functioning airports.”
For those of us who have pondered the risk of an Israeli/Iranian conflagration sparking a regional war, and perhaps even WWIII headway, there are alternative scenarios. Does an Assad regime collapse unleash a power vacuum and absolute anarchy and violence for an already chaotic region? Does Putin move to protect Assad and Russia’s interests in Syria? How about Assad allies Iran, Iraq and their multifarious militant groups?
Meanwhile, Turkey’s Erdogan cheers on the rebels’ advance, while it’s quickly become open season for various militant groups to grab whatever territory they can control. The Kurdish forces in the north are being opportunistic, while preparing for reprisals and confrontation. The IDF is stepping up bombing raids on Hezbollah supply routes in Syria, while deploying additional troops to the Golan Heights. Jordan and Lebanon closed their borders with Syria.
The Assad, Iran, Hezbollah alliance is in tatters, while indispensable ally Russia’s “military operation” in Ukraine is a quagmire. There is a power vacuum militant groups are determined to exploit.
If markets don’t care, it must not be important. Ukraine, Russia, France, South Korea, China, Taiwan, Syria, the Middle East… Bubble markets make things so comfortable. Frog in the Pot Syndrome. And “American Exceptionalism,” now that’s a luscious Bubble bath in a grand Jacuzzi tub.
If parabolic “blowoff” speculative excess wasn’t precarious enough. Historic market Bubbles are these days on a collision course with metastasizing geopolitical disorder. Russia claims Ukraine and the U.S. are behind the rebels’ breakneck advance on Damascus. Putin was already increasingly unhinged. If Bashar Assad falls, it’s one more embarrassment to feed vindictiveness and the urge for retribution. “American exceptionalism” must have Putin seething. I imagine there’s nothing he would rather do than pop Bubbles.
December 5 – Financial Times (Nicholas Megaw): “Investors have pumped almost $140bn into US equity funds since last month’s election as traders bet Donald Trump’s administration will unleash sweeping tax cuts and reforms in a boon to corporate America. US equity funds have notched up inflows of $139.5bn since Trump’s victory on November 5… The rush of buying made November the busiest month for inflows on records stretching to 2000. The flood of new money has helped to drive the major US stock indices to a series of record highs…”
December 6 – Bloomberg (Isabelle Lee): “The optimism sweeping Wall Street has spurred investors to plow a record $1 trillion into US exchange-traded funds so far in 2024, racking up yet another milestone for the industry. With some 16 trading days left to go, this year’s net inflows have already surpassed the $903 billion high in 2021. Investor appetite for assets ranging from staid fixed income to speculative leveraged bets in an easy-to-trade ETF wrapper has helped fuel the boom. The market frenzy reached a fever pitch in November… It marked the best month for the S&P 500 this year while ETFs of all stripes saw a record $155 billion pour in, averaging inflows of around a $7.3 billion a day…”
For the Week:
The S&P500 gained 1.0% (up 27.7% y-t-d), while the Dow slipped 0.6% (up 18.4%). The Utilities sank 4.0% (up 18.4%). The Banks fell 1.8% (up 41.2%), and the Broker/Dealers dipped 0.3% (up 51.8%). The Transports slumped 4.2% (up 6.2%). The S&P 400 Midcaps declined 1.1% (up 19.8%), and the small cap Russell 2000 fell 1.1% (up 18.8%). The Nasdaq100 jumped 3.3% (up 28.5%). The Semiconductors rose 2.7% (up 21.2%). The Biotechs added 0.7% (up 11.5%). With bullion down $10, the HUI gold index fell 1.6% (up 21.8%).
Three-month Treasury bill rates ended the week at 4.2825%. Two-year government yields declined five bps to 4.10% (down 15bps y-t-d). Five-year T-note yields slipped a basis point to 4.04% (up 19bps). Ten-year Treasury yields dipped two bps to 4.15% (up 27bps). Long bond yields declined three bps to 4.34% (up 31bps). Benchmark Fannie Mae MBS yields dropped 12 bps to 5.39% (up 12bps).
Italian 10-year yields fell eight bps to 3.19% (down 51bps y-t-d). Greek 10-year yields slipped one basis point to 2.90% (down 15bps). Spain's 10-year yields declined three bps to 2.76% (down 23bps). German bund yields gained two bps to 2.11% (up 8bps). French yields dipped two bps to 2.88% (up 32bps). The French to German 10-year bond spread narrowed four to 77 bps. U.K. 10-year gilt yields increased three bps to 4.28% (up 74bps). U.K.'s FTSE equities index added 0.3% (up 7.4% y-t-d).
Japan's Nikkei 225 Equities Index rallied 2.3% (up 16.8% y-t-d). Japanese 10-year "JGB" yields added a basis point to 1.06% (up 45bps y-t-d). France's CAC40 rose 2.7% (down 1.5%). The German DAX equities index jumped 3.9% (up 21.7%). Spain's IBEX 35 equities index rose 3.7% (up 19.5%). Italy's FTSE MIB index surged 4.0% (up 14.5%). EM equities were mixed. Brazil's Bovespa index inched 0.2% higher (down 6.1%), and Mexico's Bolsa index recovered 3.1% (down 10.5%). South Korea's Kospi ended a wild week down 1.1% (down 8.6%). India's Sensex equities index rose 2.4% (up 13.1%). China's Shanghai Exchange Index gained 2.3% (up 14.4%). Turkey's Borsa Istanbul National 100 index surged 4.4% (up 34.9%).
Federal Reserve Credit declined $13.7 billion last week to $6.860 TN. Fed Credit was down $2.030 TN from the June 22, 2022, peak. Over the past 273 weeks, Fed Credit expanded $3.134 TN, or 84%. Fed Credit inflated $4.049 TN, or 144%, over the past 630 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt dipped $0.5 billion last week to $3.317 TN. "Custody holdings" were down $69 billion y-o-y, or 2.0%.
Total money market fund assets surged $95.9 billion to a record $6.771 TN. Money funds were up $637 billion over 18 weeks (30% annualized) and $885 billion y-t-d (15.9% ann.).
Total Commercial Paper dropped $25.6 billion to $1.159 TN. CP was down $92 billion, or 7.3%, over the past year.
Freddie Mac 30-year fixed mortgage rates fell 12 bps this week to a six-week low 6.69% (down 11bps y-o-y). Fifteen-year rates dropped 14 bps to 5.96% (down 31bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down nine bps to a seven-week low 7.06% (down 42bps).
Currency Watch:
For the week, the U.S. Dollar Index increased 0.3% to 106.055 (up 4.7% y-t-d). For the week on the upside, the Mexican peso increased 0.9%, the Swiss franc 0.3%, the South African rand 0.2%, and the British pound 0.1%. On the downside, the Brazilian real declined 1.9%, the Australian dollar 1.9%, the South Korean won 1.8%, the New Zealand dollar 1.4%, the Norwegian krone 1.2%, the Canadian dollar 1.1%, the Swedish krona 0.3%, the Singapore dollar 0.2%, the Japanese yen 0.2%, and the euro 0.1%. The Chinese (onshore) renminbi declined 0.34% versus the dollar (down 2.36% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index declined 0.7% (down 1.2% y-t-d). Spot Gold slipped 0.4% to $2,633 (up 27.6%). Silver gained 1.1% to $30.968 (up 30.1%). WTI crude dipped 80 cents, or 1.2%, to $67.20 (down 6%). Gasoline fell 1.9% (down 10%), and Natural Gas dropped 8.5% to $3.076 (up 22%). Copper rallied 1.4% (up 8%). Wheat rose 1.9% (down 14%), and Corn gained 1.8% (down 9%). Bitcoin jumped $2,800, or 2.9%, to $99,430 (up 134%).
Trump Administration Watch:
November 30 – Associated Press (Lisa Mascaro): “A tax break for millionaires, and almost everyone else. An end to the COVID-19-era government subsidies that some Americans have used to purchase health insurance. Limits to food stamps, including for women and children, and other safety net programs. Rollbacks to Biden-era green energy programs. Mass deportations. Government job cuts to ‘drain the swamp.’ Having won the election and sweeping to power, Republicans are planning an ambitious 100-day agenda with President-elect Donald Trump in the White House and GOP lawmakers in a congressional majority to accomplish their policy goals. Atop the list is the plan to renew some $4 trillion in expiring GOP tax cuts, a signature domestic achievement of Trump’s first term and an issue that may define his return to the White House. ‘What we’re focused on right now is being ready, Day 1,’ said House Majority Leader Steve Scalise, R-La., after meeting recently with GOP colleagues to map out the road ahead.”
December 6 – Axios (Zachary Basu): “President-elect Trump has assembled an administration of unprecedented, mind-boggling wealth — smashing his own first-term record by billions of dollars. That's even without counting the ballooning fortunes of his prized outside adviser and the world's richest man: Elon Musk. It's not hyperbole to call this a government of billionaires. Whether it acts as a government for billionaires… could test and potentially tarnish Trump's populist legacy. Besides Trump, Musk and his fellow Department of Government Efficiency (DOGE) head Vivek Ramaswamy, at least 11 billionaires will be serving key roles in the administration. They've been picked to lead the departments of Treasury (Scott Bessent), Commerce (Howard Lutnick), Education (Linda McMahon), Interior (Doug Burgum), the Small Business Administration (Kelly Loeffler) and NASA (Jared Isaacman).”
December 5 – Yahoo Finance (Alexis Keenan): “President-elect Donald Trump is making it clear he doesn't intend to ease up on the nation's technology giants once he is back in the Oval Office. The latest sign came Wednesday when he said he would nominate Gail Slater, an aide to Vice President-elect JD Vance, to lead the Justice Department's antitrust division. ‘Big Tech has run wild for years,’ Trump said in a statement announcing the appointment on his Truth Social platform, ‘stifling competition in our most innovative sector and, as we all know, using its market power to crack down on the rights of so many Americans, as well as those of Little Tech!’”
December 5 – Associated Press (Christopher Rugaber): “President-elect Donald Trump campaigned on the promise that his policies would reduce high borrowing costs and lighten the financial burden on American households. But what if, as many economists expect, interest rates remain elevated, well above their pre-pandemic lows? Trump could point a finger at the Federal Reserve, and in particular at its chair, Jerome Powell… During his first term, Trump repeatedly and publicly ridiculed the Powell Fed, complaining that it kept interest rates too high. Trump’s attacks on the Fed raised widespread concern about political interference in the Fed’s policymaking. On Wednesday, Powell emphasized the importance of the Fed’s independence: ‘That gives us the ability to make decisions for the benefit of all Americans at all times, not for any particular political party or political outcome.’”
December 3 – Bloomberg (Bailey Lipschultz and Vildana Hajric): “They were key online cheerleaders in restoring Donald Trump to power. Now for the day-trading warriors and crypto maximalists whose bro-coded pledges of allegiance defined much of the presidential campaign, it’s time to cash in… A laundry list of trades, starting with Bitcoin and spanning everything from Trump’s tiny social media company to online brokerages and penny stocks, have surged in the wake of the Republican victory. Part gambler’s paradise, the melt-up is also energizing those who see Trump’s election as empowering the do-it-yourself ethos of crypto... ‘It’s a full and complete vindication for everything we’ve fought for,’ says Nic Carter, founding partner of crypto investor Castle Island Ventures… ‘It’s really beyond all of our wildest expectations, and there’s a palpable feeling of relief.’”
Trade War Watch:
December 4 – New York Times (Keith Bradsher): “When Donald J. Trump fired the opening shots in a trade war during his first term, Chinese officials often took days to respond and Chinese businesses followed every threat with alarm. But this week, after the Biden administration broadened its restrictions on advanced technology that could be sent to China, Beijing announced sweeping retaliation in a single day… The fast-moving developments have underlined how far China has come as an industrial superpower, and its readiness for a potentially bruising battle with the second Trump administration. China now has a manufacturing sector that is larger than those of the United States, Germany, Japan, South Korea and Britain put together. It produces some of the world’s most advanced technology.”
December 3 – Bloomberg: “China isn’t short of options when it comes to critical minerals that could be used as counters in a trade war with the US. Beijing’s ban… covering sales to the US of gallium, germanium, antimony and superhard materials, and tighter controls on graphite, are likely an opening salvo in export controls that could be extended to dozens of niche materials if trade frictions with Washington escalate. ‘This may only be the start of the country ensuring national security and its strategic role in mineral resources,’ Citic Securities Co. said… The state-backed brokerage listed 10 commodities, including the 17 elements grouped as rare earths, in which China holds an outsized role as producer or processor. The minerals are typically crucial to high-tech manufacturing, including so-called dual uses in military applications.”
December 5 – Bloomberg (Brian Platt): “The man who led Canada’s trade negotiating team during Donald Trump’s first term said the US President-elect ‘likes tariffs even more now’ and will be less constrained about using them in his second. Steve Verheul, who was Canada’s chief trade negotiator from 2017 to 2021, said Trump’s threat of 25% tariffs on Canadian and Mexican imports would be a significant economic hit to all three countries, creating ‘a highly disruptive period of time.’ But if the Trump administration tries to levy tariffs on all manufactured goods from Canada, but not oil and agricultural commodities, Canada has a card it can play — it can place export levies on those goods as a negotiating tactic, said Verheul...”
December 1 – Financial Times (Michael Stott): “Donald Trump threatens Mexico’s economy with tariffs on its exports. Mexico agrees to negotiate and a deal is reached. The result? Business as usual and both sides claim a win. That scenario played out in the first Trump administration, when the US-Canada-Mexico free trade agreement… replaced Nafta. Optimists believe the second Trump administration will stage a repeat performance. They shrugged off last week’s vow by the president-elect to impose 25% tariffs on imports from Mexico on his first day back in office. Investors are buying the positive view… ‘Financial markets have an almost unlimited capacity at the moment to shrug off bad news about Mexico,’ said Ernesto Revilla, chief Latin America economist at Citi. This time, though, may be different. Consider first the reasons for the tariffs. In 2018, Trump’s main complaint was that Nafta was unfair to American workers. Last week, Trump said his new tariff on Mexico and Canada would stay ‘until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country’.”
November 30 – Financial Times (Aime Williams): “US president-elect Donald Trump… threatened tariffs of 100% against the Brics countries unless their governments agree not to create a new currency as an alternative to the US dollar. ‘The idea that the Brics Countries are trying to move away from the Dollar while we stand by and watch is OVER,’ Trump wrote… The group is made up primarily of Brazil, Russia, India, China and South Africa, but has recently expanded to include Iran, United Arab Emirates, Egypt and Ethiopia… Brics nations such as Russia and China have called for the bloc to challenge the dollar’s status as the world’s reserve currency… ‘We require a commitment from these Countries that they will neither create a new BRICS Currency, nor back any other Currency to replace the mighty U.S. Dollar or, they will face 100% Tariffs, and should expect to say goodbye to selling into the wonderful U.S. Economy,’ Trump wrote…”
France Instability Watch:
December 4 – Financial Times (Leila Abboud and Adrienne Klasa): “The French parliament… voted to oust Prime Minister Michel Barnier over his proposed deficit-cutting budget, plunging the country into deeper political turmoil. A motion of no confidence was approved by 331 votes in the 577-member national assembly, as Marine Le Pen’s far-right party teamed up with a leftist bloc to bring down Barnier’s minority government. Barnier’s administration has collapsed without adopting his contentious 2025 budget that included €60bn in tax increases and spending cuts… President Emmanuel Macron will now have to select another prime minister, a task made difficult by a raucous parliament divided into three blocs… Barnier’s three-month term as prime minister was the shortest of any premier since France’s Fifth Republic was founded in 1958. It is only the second time a government has been voted down since then. “
December 5 – Bloomberg (Ania Nussbaum): “Emmanuel Macron is looking for another prime minister… after the far right joined forces with the left to push through a no-confidence motion against his government over a budget dispute. The French president needs to find a premier who can pass a 2025 budget through a deeply divided parliament. But any new leader will face the same financial squeeze that brought down Prime Minister Michel Barnier’s administration… The budget bill that sank Barnier’s government contained €60 billion ($63bn) in tax increases and spending cuts that aimed for a reduction in the deficit to 5% of economic output in 2025, from an estimated 6.1% this year. ‘This budget was toxic for the French,’ far-right leader Marine Le Pen said… on French television after she voted to bring down the administration.”
December 4 – Bloomberg (Lionel Laurent): “France is doing a better job at protecting its monuments than the functioning of its democracy. Even as Notre Dame cathedral rises from the ashes as a symbol of unity in adversity, Europe’s No. 2 economy faces unprecedented instability after far-right leader Marine Le Pen’s teaming-up with the left to topple Michel Barnier’s government and torpedo his budget. At a time when the entire region is vulnerable to Donald Trump’s trade barbs and Vladimir Putin’s war machine, this is a journey into the unknown that the West doesn’t need. The parliamentary chaos lays bare the wreckage of France’s political landscape after successive pandemic and inflation shocks and the end of a strong run of economic growth and job creation. Barnier’s belt-tightening plan to lower the French deficit with €60 billion in savings was never going to be a crowd-pleaser, yet it’s a shock to see how easily it was taken hostage by politicians more interested in presidential elections in 2027 than budget math.”
Middle East War Watch:
December 5 – Reuters (Suleiman Al-Khalidi and Timour Azhari): “Syrian rebels captured the city of Hama on Thursday, a major victory in a week-old lightning advance across northern Syria and a devastating new blow to President Bashar al-Assad and his Russian and Iranian allies. After years locked behind frozen frontlines, the rebels have burst forth to mount the swiftest battlefield advance by either side since a rebellion against Assad descended into civil war 13 years ago. The capture of Hama gives them control of a strategic central city they never managed to seize before… The insurgents said they were ready to march on south towards Homs, a key crossroads city that links the capital Damascus to the north and to the coast. ‘Your time has come,’ said a rebel operations room in an online post, calling on Homs residents to rise up in revolution.”
November 30 – Wall Street Journal (Yaroslav Trofimov): “It had taken the Syrian regime and its backers—Iran, Russia and Hezbollah—more than four years to dislodge rebel forces from the country’s second-largest city of Aleppo. At the time, in 2016, they celebrated that victory as the turning point in Syria’s civil war. Now, a surprise rebel offensive has recaptured Aleppo in just a few days, including parts of the city that the Syrian army had never surrendered before. This stunning feat is the direct consequence of new wars that have erupted outside Syria’s borders. ‘It’s a tectonic shift,’ said Andrew Tabler, a senior fellow at the Washington Institute for Near East Policy... ‘Regional and international powers intervened in Syria over a decade ago, and now the conflicts of Ukraine, Gaza and Lebanon all come together and overlap in Aleppo.’”
December 4 – Reuters (Erin Banco): “Lebanon’s Hezbollah has been significantly degraded militarily by Israel, but the Iran-backed group will likely try to rebuild its stockpiles and forces and pose a longterm threat to the U.S. and its regional allies, four sources briefed on updated U.S. intelligence told Reuters. U.S. intelligence agencies assessed in recent weeks that Hezbollah, even amid Israel's military campaign, had begun to recruit new fighters and was trying to find ways to rearm through domestic production and by smuggling materials through Syria…”
Taiwan Watch:
December 1 – Wall Street Journal (Joyu Wang): “On the first day of a highly sensitive visit to the U.S., Taiwan President Lai Ching-te sent a firm but conciliatory message to both China and the incoming Trump administration: While Taipei doesn’t seek a war with Beijing, it is counting on U.S. support to deter any aggression from its larger neighbor. ‘Peace is priceless, and war has no winners, we have to fight, fight together to prevent war,’ Lai said… in Honolulu, in the presence of members of Hawaii’s congressional delegation, former U.S. officials and state lawmakers.”
December 1 – Associated Press (Audrey McAvoy): “Taiwan’s president visited a U.S. State Department-funded think tank and educational institution Sunday on the second day of a two-day visit to Hawaii that’s part of a Pacific island tour that has already triggered criticism from Beijing… China’s Foreign Ministry said it ‘strongly condemned’ U.S. support for Lai’s visit and had lodged a complaint with the U.S. It also denounced a newly announced U.S. weapons sale to Taiwan… ‘China will closely monitor the situation’s development, and take resolute and forceful measures to safeguard the country’s sovereignty and territorial integrity,’ said…”
Market Instability Watch:
December 2 – Bloomberg (Mia Glass and Masaki Kondo): “The yen carry trade… is regaining popularity. Japanese retail investors as well as leveraged funds and asset managers outside the country are estimated to have boosted bearish wagers on the yen… ‘The very large absolute rate differential against the yen means that it will always be seen as a funding currency,’ said Alvin Tan, head of Asia FX strategy at Royal Bank of Canada... ‘The main reason why it would not be used as a funding currency for a carry trade is because of volatility.’”
December 2 – Bloomberg (Erica Yokoyama and Takashi Umekawa): “Japan could use a wake-up call over its mountain of debt through credit rating firms warning of the potential for cuts to sovereign bond ratings, according to a government advisor. ‘Recent fiscal policy has turned into a popularity contest,’ said Mana Nakazora, a credit analyst on an economic panel advising Prime Minister Shigeru Ishiba. ‘I’d rather that credit rating firms say that they’ll cut ratings’ to warn authorities of risk, she said… ‘No matter who takes the helm, Japan’s fiscal discipline will worsen in a situation like this,’ said Nakazora.”
Global Credit Bubble Watch:
December 1 – Bloomberg (Paul J. Davies): “Big banks have been warning their investors about the competition they face from private credit, electronic market makers and others for some time. Now we have a number to put on it and it’s not pretty… Banks are set to lose as much as $50 billion from annual revenue by 2027, mostly in the US and mostly in corporate and investment banking, according to research from Oliver Wyman LLC and Morgan Stanley. The industry can replace up to $15 billion of this, mainly through lending more to illiquid private markets, which is already an area of concern for policymakers focused on the risks of shadow banking. The Bank of England warned that non-banks, particularly those that used borrowed money, were likely to amplify market shocks in its annual financial stability report…”
December 3 – Bloomberg (Silla Brush): “BlackRock Inc. agreed to buy HPS Investment Partners in an all-stock deal valued at roughly $12 billion, a purchase that will propel the world’s largest asset manager into the highest ranks of private credit… ‘We are delivering across public and private markets, equity and debt,’ BlackRock Chief Executive Officer Larry Fink said… ‘The blending of public and private in today’s reality is a part of the entire market.’”
December 5 – Bloomberg (Carmen Arroyo and Silas Brown): “Apollo Global Management Inc. is focusing its new private-credit trading desk on investment-grade debt it has originated as the firm rolls out plans to bundle it into exchange-traded funds, according to people with knowledge of the matter. The refined scope of the firm’s operation would help traders to establish a market price for the debt, which would be crucial to the ETF push.”
AI Bubble Watch:
December 3 – New York Times (Don Clark): “On the south side of Austin, Texas, engineers at the semiconductor maker Advanced Micro Devices designed an artificial intelligence chip called MI300 that was released a year ago and is expected to generate more than $5 billion in sales in its first year of release. Not far away in a north Austin high-rise, designers at Amazon developed a new and faster version of an A.I. chip called Trainium. They then tested the chip in creations including palm-size circuit boards and complex computers the size of two refrigerators. Those two efforts in the capital of Texas reflect a shift in the rapidly evolving market of A.I. chips… The industry has long been dominated by Nvidia…”
December 5 – Bloomberg (Will Wade): “US demand for electricity will surge almost 16% over the next five years, more than triple the estimate from a year ago, driven by new data centers and factories that are going to suck up power, according to a new report. Utilities are expecting customers to need as much as 128 gigawatts of new capacity in 2029, according to the report… by Grid Strategies. That figure is based on revised estimates from regional grid operators submitted this year, and dwarfs the company’s 39-gigawatt forecast from a year ago.”
Bubble and Mania Watch:
December 2 – Bloomberg (Jill R. Shah, Paula Seligson and Katherine Doherty): “Jane Street Group LLC, one of the largest market-making firms in the US, posted $14.2 billion of net trading revenue for the first three quarters of 2024, already surpassing the 12-month record it set last year. Net trading revenue for the third period more than doubled on a year-over-year basis to $5.8 billion… Added to the $8.4 billion that Jane Street amassed in this year’s first half, the total exceeds the $10.6 billion generated during all of 2023.”
December 5 – Bloomberg (Daniel Neligh, Maria Clara Cobo, and Andre Tartar): “The largest intergenerational wealth transfer in US history is about to take place — though the vast majority of Americans are unlikely to inherit much money at all. About $105 trillion is projected to be passed down from older generations over the next quarter century, according to research firm Cerulli Associates, an amount roughly equal to global gross domestic product in 2023. Rising stock markets and home prices, as well as inflation, have fattened the estates that members of the baby boom generation… are expected to leave their heirs. The latest inheritance projection by Cerulli is 45% higher than the 25-year forecast the firm made only three years ago.”
December 5 – CNN (Jeanne Sahadi): “A new analysis by Fidelity Investments, one of the largest providers of 401(k) retirement plans, found that the number of accounts with balances topping $1 million rose by 9.5% in the third quarter. All told, of the roughly 24 million participant accounts in the 401(k) plans for which Fidelity serves as record keeper, 544,000 of them had balances over $1 million, up from 497,000 in the second quarter.”
December 5 – Bloomberg (Yiqin Shen): “To sate his multibillion dollar rampant appetite for Bitcoin, Michael Saylor has tapped demand from retail investors transfixed by MicroStrategy Inc.’s more than 500% rally this year. He’s also benefited from hedge funds who care far less where the stock trades. Calamos Advisors LLC co-Chief Investment Officer Eli Pars has been among the buyers for more than $6 billion of convertible notes sold by MicroStrategy this year to finance the purchase of his ever-expanding cryptocurrency hoard. Like many other managers, Pars uses the notes in market-neutral arbitrage bets that exploit the surging volatility of the underlying asset. ‘Convertibles are a way for issuers to monetize the volatility of their stocks, and MicroStrategy is an extreme example,’ said Pars…”
December 3 – Bloomberg (Josh Saul): “One of the world’s biggest Bitcoin miners is buying a wind farm to power its operations as big tech firms increasingly suck up available sources of electricity for their own data centers. MARA Holdings Inc. bought the North Texas wind farm in Hansford County from a joint venture between National Grid Plc and the Washington State Investment Board… MARA plans to use the facility’s 114 megawatts of power to mine Bitcoin when the wind is blowing and halt operations when it’s not.”
December 5 – Bloomberg (Christopher Anstey): “Former US Treasury Secretary Lawrence Summers dismissed the idea of the government setting up a reserve of Bitcoin assets, and cautioned about the political challenge ahead in scaling down federal spending in the way billionaire and President-elect Donald Trump ally Elon Musk plans. ‘Some of what is being said — this idea that we should have some kind of national Bitcoin reserve — is crazy,’ Summers said… ‘There’s no reason to do that other than to pander to generous special-interest campaign contributors.’”
December 5 – Bloomberg (Carmen Reinicke): “Animal spirits in the US equity market rampaged into a handful of meme stocks after a cryptic afternoon X post from Keith Gill, the online persona known as Roaring Kitty who rose to fame in 2021’s meme-stock mania. Shares of GameStop Corp., one of Gill’s original favorites in the January 2021 meme frenzy, spiked as much as 14%, triggering a volatility halt, before paring most of the gain to end the day up 5.9%. AMC Entertainment… also erased some of a spike to close 5.9% higher. The trader posted a mock-up of a Time magazine cover, featuring a blank computer screen with a media player that resembles YouTube.”
December 2 – Bloomberg (Michael Msika): “Short-sellers are capitulating as the S&P 500 Index keeps hitting record highs and is set for its best year since 2021, according to Citigroup Inc. strategists. Investor positioning in S&P 500 futures is ‘completely one-sided,’ the strategists led by Chris Montagu wrote in a note. It’s ‘setting new highs for a fourth consecutive week and increasingly the hold-out shorts are capitulating,’ they said.”
December 5 – Bloomberg (Isabelle Lee and Lu Wang): “It’s the latest high-octane offering from Wall Street’s rapidly growing line-up of risky ETF filings: Leveraged products that amp up exposures to large-cap stocks and crypto in one fell swoop – giving traders a way to double down on two of this year’s best-performing assets… Volatility Shares filed last week to launch a series of exchange-traded funds that seek to layer equity investments on top of digital tokens. The pitch is that by going all-in on derivatives, investors can get a $100 bet on US shares along with $100 of crypto exposure, for just a $100 outlay in total.”
U.S./Russia/China/Europe Watch:
December 2 – Bloomberg (Mackenzie Hawkins): “The US unveiled new restrictions on China’s access to vital components for chips and AI, escalating a campaign to contain Beijing’s technological ambitions but stopping short of earlier proposals that would have sanctioned more key Chinese firms. The Department of Commerce slapped fresh curbs on the sale of high-bandwidth memory chips made by US and foreign companies, likely affecting South Korea’s SK Hynix Inc. and Samsung Electronics Co. as well as… Micron Technology Inc… The agency also expanded existing controls on chipmaking gear, including products made by US firms at foreign facilities, but with carveouts for key allies, such as Japan and the Netherlands.”
December 1 – Bloomberg (Trista Xinyi Luo and Yian Lee): “China warned the Biden administration to tread cautiously on the issue of Taiwan after President Lai Ching-te landed in Hawaii on his first stopover on US soil. Lai was welcomed by Hawaii governor Josh Green after arriving Saturday on a stopover as part of a state visit to Taiwan’s Pacific island allies. Lai visited a World War II memorial and an emergency management office. He said… his trip served to ‘symbolize the long-standing friendship between Taiwan and the US, and lays foundations for further collaboration.’”
December 1 – Wall Street Journal (Georgi Kantchev and Lingling Wei): “China has been supporting Russia’s economy since the start of the Ukraine war by buying its oil while supplying it with everything from microelectronics to washing machines. Meanwhile, Beijing has been getting its own strategic benefit: a real-world case study in how to circumvent Western sanctions. An interagency group, set up by China in the months following the full-scale invasion, has studied the impact of sanctions and produced reports regularly for the country’s leadership, according to people familiar with the matter. The goal is to draw lessons about how to mitigate them, particularly in case a conflict over Taiwan… As part of the effort, Chinese officials periodically visit Moscow to meet with the Russian Central Bank, the Finance Ministry and other agencies involved in countering sanctions…”
December 3 – Reuters (Michelle Nichols): “Russia and the United States clashed at the United Nations…, accusing each other of supporting terrorism during a Security Council meeting convened over a sudden escalation of fighting in Syria. Syrian rebels captured Aleppo last week in an attack initiated by Hayat Tahrir al-Sham. Formerly known as the Nusra Front, it was al Qaeda's official wing in Syria until breaking ties in 2016… Deputy U.S. Ambassador to the U.N. Robert Wood called for a de-escalation of the fighting in Syria and the protection of civilians… In remarks directed at Wood, Russia's U.N. Ambassador Vassily Nebenzia said: ‘You were unable to summon the courage to condemn a clear terrorist attack undertaken against peaceful civilians in peaceful Syrian cities.’ ‘There are no illusions that Washington will ever be willing to sincerely combat international terrorism… To be frank we are pleased that we are on opposite sides of the barricades right now from you.’”
December 2 – Financial Times (Henry Foy): “Nato’s new secretary-general has warned Donald Trump that the US would face a ‘dire threat’ from China, Iran and North Korea if Ukraine is pushed to sign a peace deal on terms that are favourable to Moscow… Mark Rutte said deepening ties between US adversaries endangered America as he made a pitch to the president-elect to stick with Nato and continue to support Ukraine. Rutte noted the risks from Russia supplying missile technology to North Korea and cash to Iran… He said that Chinese President Xi Jinping ‘might get thoughts about something else in the future if there is not a good deal [for Ukraine]’. ‘We cannot have a situation where we have [North Korean leader] Kim Jong Un and the Russian leader and Xi Jinping and Iran high-fiving because we came to a deal which is not good for Ukraine, because long-term that will be a dire security threat not only to Europe but also to the US,’ Rutte told the FT…”
December 4 – Financial Times (Christian Davies and Henry Foy): “Nato secretary-general Mark Rutte has accused Russia of assisting North Korea’s nuclear programme in exchange for Pyongyang sending troops to help its war against Ukraine, the first such claim by a senior western official. ‘In return for troops and weapons, Russia is providing North Korea with support for its missile and nuclear programmes,’ Rutte said after meeting Nato foreign ministers... ‘These developments could destabilise the Korean Peninsula and even threaten the United States.’ South Korea and the EU last month condemned the deployment of soldiers to Russia by Pyongyang, saying they were ‘also deeply concerned’ about the possibility of nuclear technology being transferred to North Korea.”
December 4 – Reuters (Luiza Ile): “Documents declassified by Romania’s top security council… said the country was a target of ‘aggressive hybrid Russian attacks’ in a period of consecutive elections. Romanians will vote in a presidential election runoff on Sunday that could see Calin Georgescu, a far-right, pro-Russian critic of NATO, defeat pro-European centrist Elena Lasconi… Having polled in single digits before the first presidential election round on Nov. 24, Georgescu - who wants to end Romanian support for Ukraine against Russia's invasion - surged to a victory that raised questions over how such a surprise had been possible in a European Union and NATO member state… Romania's intelligence agency said Georgescu was massively promoted on social media platform TikTok through coordinated accounts, recommendation algorithms and paid promotion.”
De-globalization Watch:
December 5 – Bloomberg: “Beijing has set out to extend its domestic laws across international borders with a ban on selling some goods to the US that applies to companies both inside and outside China. The first use of new export control rules attempts to replicate the extraterritorial reach of US and European sanctions by covering Chinese products or goods with Chinese parts in them… China declared it’s banning both the sale of dual-use items to the American military and also the export to the US of materials such as gallium and germanium. Companies and people overseas will be subject to those restrictions…”
Inflation Watch:
December 3 – Wall Street Journal (Elizabeth Findell and Gina Heeb): “Two decades ago, this booming suburb on the northeastern edge of Dallas was a small town accessed by only a two-lane highway. Now, 200,000 people fill its sprawling subdivisions, with new construction everywhere. McKinney, like the country’s other fastest-growing cities, is a town built by imported labor and home to an industry hooked on imported steel and lumber. That leaves the construction industry particularly vulnerable to President-elect Donald Trump’s vow to deport millions of undocumented immigrants, and his threats to introduce new tariffs on Mexico and Canada. ‘We will absolutely have a labor shortage,’ said George Fuller, a longtime Texas developer who is also mayor of McKinney. ‘Whether you want to acknowledge it or not, these industries depend on immigrant labor.’”
December 4 – Bloomberg (Alex Tanzi): “Wage growth among the smallest US businesses accelerated in November for the first time since early last year, according to… ADP Research Institute. Paychecks at firms that employ fewer than 20 people grew at a 4.2% annual rate in the month — climbing from 3.9% in October, the biggest jump since early 2022. That cohort of tiny firms employs more than a quarter of the US workforce, and an acceleration in wages there may be of concern to Federal Reserve policymakers…”
December 6 – Wall Street Journal (Giulia Petroni): “Food prices climbed to a 19-month high in November driven by vegetable oils, data from the Food and Agriculture Organization of the United Nations showed… The FAO’s food price index, which tracks global prices for a basket of staple foods, averaged 127.5 points in November, a 0.5% increase from October’s level and 5.7% higher than a year earlier.”
Federal Reserve Watch:
December 4 – Reuters (Howard Schneider): “U.S. Federal Reserve Chair Jerome Powell… said the economy is stronger now than the central bank had expected in September when it began reducing interest rates, and appeared to signal his support for a slower pace of interest-rate cuts ahead. ‘The U.S. economy is in very good shape and there’s no reason for that not to continue ...the downside risks appear to be less in the labor market, growth is definitely stronger than we thought, and inflation has come in a little higher,’ Powell said... ‘So the good news is that we can afford to be a little more cautious as we try to find neutral.’”
December 4 – New York Times (Jeanna Smialek): “Jerome H. Powell… said that the central bank could be ‘more cautious’ as it cuts interest rates at a moment when the economy was growing strongly and price increases had been slightly sticky. ‘Growth is definitely stronger than we thought, and inflation is coming a little higher,’ Mr. Powell said… ‘The good news is that we can afford to be a little more cautious as we try to find neutral.’”
December 2 – Bloomberg (Craig Torres and Jonnelle Marte): “Three Federal Reserve officials… made clear they expect the US central bank to continue cutting interest rates over the next year, but stopped short of saying they are committed to making the next reduction later this month… Fed Governor Christopher Waller… said he’s inclined to vote to lower borrowing costs when Fed officials gather Dec. 17-18… ‘I believe the evidence is strong that policy continues to be significantly restrictive and that cutting again will only mean that we aren’t pressing on the brake pedal quite as hard,’ Waller said… ‘Another factor that supports a further rate cut is that the labor market appears to finally be in balance, and we should aim to keep it that way.’”
December 2 – Reuters (Michael S. Derby): “Federal Reserve Bank of New York President John Williams said… the U.S. central bank is likely to lower its interest rate target further over time as inflation pressures continue to cool. ‘Monetary policy remains in restrictive territory to support the sustainable return of inflation to our 2% goal,’ Williams said… Looking ahead, ‘I expect it will be appropriate to continue to move to a more neutral policy setting over time,’ Williams said, adding ‘the path for policy will depend on the data. If we’ve learned anything over the past five years, it’s that the outlook remains highly uncertain.’”
December 4 – Reuters (Michael S. Derby): “St. Louis Federal Reserve President Alberto Musalem said… he expects the U.S. central bank will be able to continue to cut interest rates but isn't ready to say what he thinks should happen at its policy meeting later this month. With inflation likely to continue to ebb to the Fed's 2% target over time, ‘additional easing of moderately restrictive policy toward neutral will be appropriate over time,’ Musalem said… ‘Along this baseline path, it seems important to maintain policy optionality, and the time may be approaching to consider slowing the pace of interest rate reductions, or pausing, to carefully assess the current economic environment, incoming information and evolving outlook,’ he said.”
December 4 – Bloomberg (Laura Curtis and Vince Golle): “Federal Reserve Bank of San Francisco President Mary Daly said an interest-rate cut this month isn’t certain but remains on the table for policymakers. ‘In order to keep the economy in a good place we have to continue to recalibrate policy,’ Daly said... ‘Whether it’ll be in December or some time later, that’s a question we’ll have a chance to debate and discuss in our next meeting, but the point is we have to keep policy moving down to accommodate the economy.’”
U.S. Economic Bubble Watch:
December 6 – CNBC (Jeff Cox): “Job creation in November rebounded from a near-standstill the prior month as the effects of a significant labor strike and violent storms in the Southeast receded… Nonfarm payrolls increased by 227,000 for the month, compared with an upwardly revised 36,000 in October and… consensus estimate for 214,000. September’s payroll count also was revised upward, to 255,000, up 32,000 from the prior estimate… The unemployment rate edged higher to 4.2%, as expected. The jobless figure rose as the labor force participation rate nudged lower and the labor force itself declined… Job gains were focused in health care (54,000), leisure and hospitality (53,000), and government (33,000)… Worker pay continued to rise, with average hourly earnings up 0.4% from a month ago and 4% on a 12-month basis. Both numbers were 0.1 percentage point above expectations.”
November 30 – Reuters (Ananya Mariam Rajesh and Bianca Flowers): “Black Friday spending in U.S. retail stores was muted this year in contrast to a more robust rise online, as bargain-hungry Americans skipped stores in favor of their phones and laptops, according to… Mastercard and other data providers… U.S. e-commerce sales increased by a hefty 14.6% online, according to Mastercard SpendingPulse…”
December 5 – Associated Press (Matt Ott): “The number of Americans applying for unemployment benefits rose last week but remains at historically healthy levels. Jobless claim applications rose by 9,000 to 224,000 for the week of Nov. 30… Continuing claims, the total number of Americans collecting jobless benefits, fell by 25,000 to 1.87 million for the week of Nov. 23. That’s down from the three-year high levels it had been at the past few weeks.”
December 4 – Bloomberg (Vince Golle): “US services activity expanded in November at the slowest pace in three months as demand and employment growth settled back, indicating the largest part of the economy is losing momentum. The Institute for Supply Management’s index of services dropped 3.9 points, the first decline since June… The group’s new orders gauge decreased 3.7 points to a three-month low of 53.7. A measure of business activity… also fell to the lowest level since August… ‘This reinforces the view over the last several months that the services sector has returned to sustained growth,’ Steve Miller, chair of the ISM Services Business Survey Committee, said… ‘Not surprisingly, election ramifications and tariffs were mentioned often, with cautionary outlooks related to the potential impact on respondents’ specific industries’… Meanwhile, the index of prices paid for materials and services edged higher in a sign services continue to contend with elevated cost pressures.”
December 4 – Bloomberg (Catarina Saraiva): “Economic activity increased slightly in November after little change in preceding months, and US businesses grew more upbeat about demand prospects, the Federal Reserve said in its latest Beige Book survey. ‘Though growth in economic activity was generally small, expectations for growth rose moderately across most geographies and sectors,’ according to the report... ‘Business contacts expressed optimism that demand will rise in coming months. Consumer spending was generally stable.’”
December 4 – Bloomberg (Vince Golle): “US mortgage rates dropped to the lowest level since mid-October and spurred a financing flurry for home purchases during the week that included the Thanksgiving holiday. The contract rate on a 30-year mortgage decreased 17 bps, the biggest weekly slide since August, to 6.69% in the week ended Nov. 29, according to Mortgage Bankers Association data…”
December 4 – CNBC (Diana Olick): “Potential homebuyers are responding to lower mortgage rates and a higher supply of homes for sale. That fueled mortgage demand last week, as consumers looking to refinance pulled back… Applications for a mortgage to purchase a home jumped 6% for the week, the highest level since January… ‘The recent strength in purchase activity continues, supported by lower rates and higher inventory levels, which are giving prospective buyers more options compared to earlier in the year,’ said Joel Kan, an MBA economist…”
December 2 – Yahoo Finance (Hamza Shaban): “The end of the holiday weekend added two fresh examples of a historic shift on Wall Street: More CEOs than ever are heading for the exits. Over the past 24 hours, the leaders of chipmaker Intel and auto giant Stellantis have both announced their departures… The leadership changes highlight the idiosyncrasies and challenges of each company… But they also reflect a broader trend across corporate America. Through October, more than 1,800 CEOs have announced their departures, according to… Challenger, Gray & Christmas. That’s the highest year-to-date figure observed since the firm began tracking CEO changes in 2002. The number of exits is up 19% from the more than 1,500 departures during the same period last year, which was the previous year-to-date record.”
December 4 – Bloomberg (Eliyahu Kamisher and Maxwell Adler): “San Francisco is projecting a $876 million budget shortfall over the next two fiscal years, prompting Mayor London Breed to instruct city departments to plan for 15% across-the-board spending cuts. The deficit… comes as San Francisco is contending with a sluggish recovery of its hotel and business tax base, with rising expenses that outpace revenue.”
December 4 – New York Times (Denny Jacob and Christopher Otts): “General Motors said it expects to take more than $5 billion in noncash charges in the fourth quarter because of weakness in its China business that will force the automaker to close plants and offer fewer models… The move is in recognition of the company’s dimmer long-term outlook for the business… GM separately expects a $2.7 billion hit from restructuring actions such as factory closures, aimed at returning its China operations to profitability.”
Fixed Income Watch:
December 4 – Bloomberg (Lily Meier): “Municipal bond bankers should prepare for a bigger onslaught of sales in 2025, even after a blockbuster year of supply. States, cities, school districts, colleges, hospitals and other borrowers in the $4 trillion muni-bond market are poised to issue a record sum next year, according to annual supply forecasts collected by Bloomberg.”
China Watch:
December 3 – Wall Street Journal (Jason Douglas, Jon Emont and Samantha Pearson): “A deluge of cheap Chinese goods washing over the developing world is jacking up tensions between China and the Global South, complicating Beijing’s plans to build alliances as it confronts escalating trade tensions with the U.S. With President-elect Donald Trump saying he plans to significantly increase tariffs on China, Beijing is hoping to unload more of its excess factory production to developing-world countries… But many of those countries are pushing back, as cut-price Chinese imports put pressure on their factories, killing jobs and blocking efforts to grow manufacturing at home. Many poorer countries have been counting on expanding manufacturing as the best way to propel their rise up the development ladder. For China, the emerging backlash threatens to undermine its goal of being a leader of the developing world…”
December 4 – Bloomberg (Josh Xiao): “Chinese state media warned against blindly chasing faster growth and signaled more focus on boosting consumption in a flurry of articles setting the stage for a key economic meeting next week. While officials have made every effort to hit this year’s expansion goal, coming in ‘a little to the left or right’ of that around 5% target would be ‘acceptable,’ the official Xinhua News Agency wrote… ‘If we do not get rid of the ‘worship of speed’ mindset and are addicted to building more projects, even if we can temporarily lift the pace of the growth, we will be taking an overdraft from the future,’ the report continued. ‘It’s not that we cannot grow faster — it’s a question of whether we should.’”
December 4 – Reuters (Liangping Gao and Ryan Woo): “China’s services activity expanded at a slower pace in November, pressured by easing new business growth, including in exports…, as the economy braces for a rocky ride of more U.S. tariffs under a second Trump administration. The Caixin/S&P Global services purchasing managers' index (PMI)… fell to 51.5 from 52.0 in October, but remaining above the 50-mark that separates expansion from contraction on a monthly basis.”
December 6 – Bloomberg: “China Vanke Co.’s sales slump worsened in November, adding to concern over its worsening finances during a prolonged property crisis. Contracted sales for November declined 34.4% from a year earlier to 20.1 billion yuan ($2.8bn), widening from a 22.8% drop in October… The sales drop underscores the strains at state-backed Vanke, one of the few distressed Chinese developers that have yet to default during the unprecedented property downturn.”
December 4 – Bloomberg: “Chinese builder Country Garden… sales slump exacerbated in November, adding to the Chinese developer’s liquidity concern as it gains more time to map out a debt overhaul. Contracted sales for November declined 52.3% from a year earlier to 3.01 billion yuan ($414 million), widening from a 31% drop in October… Country Garden’s month-on-month decline in home sales largely surpasses the 6.9% slide at the 100 biggest real estate companies tracked by China Real Estate Information Corp.”
November 30 – Bloomberg: “China’s residential market sales fell again in November, suggesting the property sector still has some ways to go before it can show a sustained recovery. The value of new home sales from the 100 biggest real estate companies dropped 6.9% from a year earlier to 363 billion yuan ($50bn), reversing a 7.1% gain in October… Sales declined 16.6% from the previous month.”
December 3 – Bloomberg: “China’s youth are draining vigor from consumption as a result of deep job losses, a marked contrast with older people’s spending habits that have remained stable since the pandemic, according to a prominent Chinese economist… ‘The younger a province’s population is, the slower its consumption growth has been,’ Gao said…, citing his analysis of regional data. In public remarks…, he described China’s post-pandemic society as being ‘full of vibrant old people, lifeless young people and despairing middle-aged people.’”
Central Bank Watch:
December 3 – Reuters (Karin Strohecker and Sumanta Sen): “Monetary easing by central banks across developed and emerging economies trundled along in November with markets warily gearing up for a new year that could bring tectonic shifts to the global policy making backdrop. Four of the six central banks overseeing the 10 most heavily traded currencies that held meetings in November lowered their lending benchmarks. Central banks in New Zealand and Sweden each shaved 50 bps off their interest rates while the U.S. Federal Reserve and the Bank of England delivered 25 bps cuts. Policy makers in Australia and Norway decided to leave interest rates unchanged, while their peers in Switzerland, Japan, Canada and at the European Central Bank held no rate setting meetings.”
December 4 – Financial Times (Sam Fleming): “The OECD has warned central banks against cutting interest rates too fast, flagging the threat posed by ‘persistent’ inflation in the price of services. The… organisation said in its latest global outlook that the world economy was showing ‘remarkable resilience’, as it welcomed a continued retreat in overall price pressures following the severest bout of inflation for a generation. Its growth forecast for the US… was sharply upgraded to 2.4% next year, compared with 1.6% in its September outlook, driven by solid consumption and underpinned by ‘brisk’ wage growth. Central banks in most of the OECD economies have cut rates… But with services price inflation at a median of 4% across the group of rich nations, central banks could not afford to loosen their grip too much, the report said.”
Global Bubble Watch:
December 4 – Bloomberg (Craig Stirling): “The global economy faces proliferating risks ranging from trade tensions to wars and debt troubles that could threaten its ‘remarkable resilience’ of past years, the OECD said. Just weeks away from Donald Trump assuming the US presidency in January, the Paris-based club of rich economies applauded the world’s recent experience of stable growth and ebbing inflation, while warning that notable dangers are lurking on the horizon. ‘Robust overall performance masks significant differences across regions and countries, and is surrounded by important downside risks and uncertainties,’ OECD Chief Economist Alvaro Pereira wrote… ‘There are increasing risks related to rising trade tensions and protectionism, a possible escalation of geopolitical conflicts, and challenging fiscal policies in some countries.’”
December 6 – Reuters (Promit Mukherjee and Ismail Shakil): “Canada had 1.5 million unemployed people in November, propelling its jobless rate to a near-eight-year high outside of the pandemic era and boosting chances of a large interest rate cut on Dec. 11. The jobless rate rose to a more than expected 6.8% in November…, a rise of 1.7 percentage points since April 2023.”
Europe Watch:
December 2 – Reuters (Jonathan Cable): “Euro zone manufacturing activity fell sharply last month and a further decline in demand likely dashed any hopes for an imminent recovery after the sector had showed some signs of stabilisation in October… HCOB's final euro zone manufacturing Purchasing Managers’ Index (PMI)… sank to 45.2 in November… ‘These numbers look terrible. It’s like the euro zone's manufacturing recession is never going to end. As new orders fell fast and at an accelerated pace, there's no sign of a recovery anytime soon,’ said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank. ‘The downturn is widespread, hitting all of the top three euro zone countries. Germany and France are faring the worst, and Italy is not doing much better.’”
December 4 – Reuters (Jonathan Cable): “Business activity across the euro zone fell sharply last month as the bloc's dominant services sector joined the manufacturing sector in contracting… ‘The services sector, which had been holding up the overall economy, is now shrinking for the first time since January. This is bad news for overall growth prospects, especially since this weakness is seen across the top-three euro economies,’ said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.”
Japan Watch:
November 29 – Bloomberg (Toru Fujioka and Catarina Saraiva): “Bank of Japan Governor Kazuo Ueda said interest-rate hikes are ‘nearing’ as inflation and economic trends develop in line with the central bank’s forecasts, helping strengthen the yen without explicitly supporting an increase in December. ‘We will adjust the degree of monetary easing at the appropriate time if we become confident or certain that the economy will move as forecasted by our economic and price outlook — particularly that the underlying inflation rises toward 2%,’ Ueda said… The next rate hike is ‘nearing in the sense that economic data are on track,’ he said.”
December 2 – Bloomberg (Toru Fujioka): “Bank of Japan Governor Kazuo Ueda has plenty of data to support the case for raising the benchmark rate in December, an outcome that would mark the first tightening of policy three times in a calendar year since the peak of Japan’s asset bubble in 1989. The governor appears determined to weigh his options until the last minute before the Dec. 19 decision. He’ll sift through forthcoming numbers including the central bank’s Tankan survey on Dec. 13 and monitor the Federal Reserve’s own rate decision due several hours before the BOJ’s board sets policy. Still, expectations of a near-term move are rising.”
December 5 – Bloomberg (Erica Yokoyama): “Base salaries for regular workers in Japan rose by a record, a further indication of progress toward a positive economic cycle that will support market speculation of a near-term rate hike by the central bank. Base pay for full-time workers increased by 2.8% in October from a year ago, the biggest gain for comparable data back to 1994…”
Emerging Markets Watch:
December 2 – Reuters (Marcelo Teixeira): “Banks which financed two Brazilian coffee traders that last week sought court-supervised debt restructuring have a total of 1.1 billion reais ($181.6 million) in credit with the firms… The amount refers only to advance money the banks gave to traders Atlantica and Cafebras in contracts linked to future coffee exports… It is not known if the traders have other debt with roasters or coffee importers related to supply deals.”
Leveraged Speculation Watch:
December 2 – Bloomberg (Sridhar Natarajan, Nishant Kumar and Devika Krishna Kumar): “Ken Griffin’s Citadel is on track to defy a sluggish year for commodities trading across Wall Street, burnishing the hedge fund’s image as a dominant force in the asset class. Citadel’s commodities business generated about $4 billion of profit this year, driven by natural gas trading…”
December 2 – Wall Street Journal (Peter Rudegeair): “One of the oldest hedge-fund firms is seeing an exodus of investors after years of lackluster returns and executive turnover. Paloma Partners had so many investors ask to pull out their money that it decided to pay them partly in cash but mostly through the equivalent of IOUs… The firm said it didn’t have enough easy-to-sell assets on hand to immediately satisfy redemption requests while also maintaining diversification in its investment mix.”
Social, Political, Environmental, Cybersecurity Instability Watch:
U.S. Economic Bubble Watch:
December 6 – CNBC (Jeff Cox): “Job creation in November rebounded from a near-standstill the prior month as the effects of a significant labor strike and violent storms in the Southeast receded… Nonfarm payrolls increased by 227,000 for the month, compared with an upwardly revised 36,000 in October and… consensus estimate for 214,000. September’s payroll count also was revised upward, to 255,000, up 32,000 from the prior estimate… The unemployment rate edged higher to 4.2%, as expected. The jobless figure rose as the labor force participation rate nudged lower and the labor force itself declined… Job gains were focused in health care (54,000), leisure and hospitality (53,000), and government (33,000)… Worker pay continued to rise, with average hourly earnings up 0.4% from a month ago and 4% on a 12-month basis. Both numbers were 0.1 percentage point above expectations.”
November 30 – Reuters (Ananya Mariam Rajesh and Bianca Flowers): “Black Friday spending in U.S. retail stores was muted this year in contrast to a more robust rise online, as bargain-hungry Americans skipped stores in favor of their phones and laptops, according to… Mastercard and other data providers… U.S. e-commerce sales increased by a hefty 14.6% online, according to Mastercard SpendingPulse…”
December 5 – Associated Press (Matt Ott): “The number of Americans applying for unemployment benefits rose last week but remains at historically healthy levels. Jobless claim applications rose by 9,000 to 224,000 for the week of Nov. 30… Continuing claims, the total number of Americans collecting jobless benefits, fell by 25,000 to 1.87 million for the week of Nov. 23. That’s down from the three-year high levels it had been at the past few weeks.”
December 4 – Bloomberg (Vince Golle): “US services activity expanded in November at the slowest pace in three months as demand and employment growth settled back, indicating the largest part of the economy is losing momentum. The Institute for Supply Management’s index of services dropped 3.9 points, the first decline since June… The group’s new orders gauge decreased 3.7 points to a three-month low of 53.7. A measure of business activity… also fell to the lowest level since August… ‘This reinforces the view over the last several months that the services sector has returned to sustained growth,’ Steve Miller, chair of the ISM Services Business Survey Committee, said… ‘Not surprisingly, election ramifications and tariffs were mentioned often, with cautionary outlooks related to the potential impact on respondents’ specific industries’… Meanwhile, the index of prices paid for materials and services edged higher in a sign services continue to contend with elevated cost pressures.”
December 4 – Bloomberg (Catarina Saraiva): “Economic activity increased slightly in November after little change in preceding months, and US businesses grew more upbeat about demand prospects, the Federal Reserve said in its latest Beige Book survey. ‘Though growth in economic activity was generally small, expectations for growth rose moderately across most geographies and sectors,’ according to the report... ‘Business contacts expressed optimism that demand will rise in coming months. Consumer spending was generally stable.’”
December 4 – Bloomberg (Vince Golle): “US mortgage rates dropped to the lowest level since mid-October and spurred a financing flurry for home purchases during the week that included the Thanksgiving holiday. The contract rate on a 30-year mortgage decreased 17 bps, the biggest weekly slide since August, to 6.69% in the week ended Nov. 29, according to Mortgage Bankers Association data…”
December 4 – CNBC (Diana Olick): “Potential homebuyers are responding to lower mortgage rates and a higher supply of homes for sale. That fueled mortgage demand last week, as consumers looking to refinance pulled back… Applications for a mortgage to purchase a home jumped 6% for the week, the highest level since January… ‘The recent strength in purchase activity continues, supported by lower rates and higher inventory levels, which are giving prospective buyers more options compared to earlier in the year,’ said Joel Kan, an MBA economist…”
December 2 – Yahoo Finance (Hamza Shaban): “The end of the holiday weekend added two fresh examples of a historic shift on Wall Street: More CEOs than ever are heading for the exits. Over the past 24 hours, the leaders of chipmaker Intel and auto giant Stellantis have both announced their departures… The leadership changes highlight the idiosyncrasies and challenges of each company… But they also reflect a broader trend across corporate America. Through October, more than 1,800 CEOs have announced their departures, according to… Challenger, Gray & Christmas. That’s the highest year-to-date figure observed since the firm began tracking CEO changes in 2002. The number of exits is up 19% from the more than 1,500 departures during the same period last year, which was the previous year-to-date record.”
December 4 – Bloomberg (Eliyahu Kamisher and Maxwell Adler): “San Francisco is projecting a $876 million budget shortfall over the next two fiscal years, prompting Mayor London Breed to instruct city departments to plan for 15% across-the-board spending cuts. The deficit… comes as San Francisco is contending with a sluggish recovery of its hotel and business tax base, with rising expenses that outpace revenue.”
December 4 – New York Times (Denny Jacob and Christopher Otts): “General Motors said it expects to take more than $5 billion in noncash charges in the fourth quarter because of weakness in its China business that will force the automaker to close plants and offer fewer models… The move is in recognition of the company’s dimmer long-term outlook for the business… GM separately expects a $2.7 billion hit from restructuring actions such as factory closures, aimed at returning its China operations to profitability.”
Fixed Income Watch:
December 4 – Bloomberg (Lily Meier): “Municipal bond bankers should prepare for a bigger onslaught of sales in 2025, even after a blockbuster year of supply. States, cities, school districts, colleges, hospitals and other borrowers in the $4 trillion muni-bond market are poised to issue a record sum next year, according to annual supply forecasts collected by Bloomberg.”
China Watch:
December 3 – Wall Street Journal (Jason Douglas, Jon Emont and Samantha Pearson): “A deluge of cheap Chinese goods washing over the developing world is jacking up tensions between China and the Global South, complicating Beijing’s plans to build alliances as it confronts escalating trade tensions with the U.S. With President-elect Donald Trump saying he plans to significantly increase tariffs on China, Beijing is hoping to unload more of its excess factory production to developing-world countries… But many of those countries are pushing back, as cut-price Chinese imports put pressure on their factories, killing jobs and blocking efforts to grow manufacturing at home. Many poorer countries have been counting on expanding manufacturing as the best way to propel their rise up the development ladder. For China, the emerging backlash threatens to undermine its goal of being a leader of the developing world…”
December 4 – Bloomberg (Josh Xiao): “Chinese state media warned against blindly chasing faster growth and signaled more focus on boosting consumption in a flurry of articles setting the stage for a key economic meeting next week. While officials have made every effort to hit this year’s expansion goal, coming in ‘a little to the left or right’ of that around 5% target would be ‘acceptable,’ the official Xinhua News Agency wrote… ‘If we do not get rid of the ‘worship of speed’ mindset and are addicted to building more projects, even if we can temporarily lift the pace of the growth, we will be taking an overdraft from the future,’ the report continued. ‘It’s not that we cannot grow faster — it’s a question of whether we should.’”
December 4 – Reuters (Liangping Gao and Ryan Woo): “China’s services activity expanded at a slower pace in November, pressured by easing new business growth, including in exports…, as the economy braces for a rocky ride of more U.S. tariffs under a second Trump administration. The Caixin/S&P Global services purchasing managers' index (PMI)… fell to 51.5 from 52.0 in October, but remaining above the 50-mark that separates expansion from contraction on a monthly basis.”
December 6 – Bloomberg: “China Vanke Co.’s sales slump worsened in November, adding to concern over its worsening finances during a prolonged property crisis. Contracted sales for November declined 34.4% from a year earlier to 20.1 billion yuan ($2.8bn), widening from a 22.8% drop in October… The sales drop underscores the strains at state-backed Vanke, one of the few distressed Chinese developers that have yet to default during the unprecedented property downturn.”
December 4 – Bloomberg: “Chinese builder Country Garden… sales slump exacerbated in November, adding to the Chinese developer’s liquidity concern as it gains more time to map out a debt overhaul. Contracted sales for November declined 52.3% from a year earlier to 3.01 billion yuan ($414 million), widening from a 31% drop in October… Country Garden’s month-on-month decline in home sales largely surpasses the 6.9% slide at the 100 biggest real estate companies tracked by China Real Estate Information Corp.”
November 30 – Bloomberg: “China’s residential market sales fell again in November, suggesting the property sector still has some ways to go before it can show a sustained recovery. The value of new home sales from the 100 biggest real estate companies dropped 6.9% from a year earlier to 363 billion yuan ($50bn), reversing a 7.1% gain in October… Sales declined 16.6% from the previous month.”
December 3 – Bloomberg: “China’s youth are draining vigor from consumption as a result of deep job losses, a marked contrast with older people’s spending habits that have remained stable since the pandemic, according to a prominent Chinese economist… ‘The younger a province’s population is, the slower its consumption growth has been,’ Gao said…, citing his analysis of regional data. In public remarks…, he described China’s post-pandemic society as being ‘full of vibrant old people, lifeless young people and despairing middle-aged people.’”
Central Bank Watch:
December 3 – Reuters (Karin Strohecker and Sumanta Sen): “Monetary easing by central banks across developed and emerging economies trundled along in November with markets warily gearing up for a new year that could bring tectonic shifts to the global policy making backdrop. Four of the six central banks overseeing the 10 most heavily traded currencies that held meetings in November lowered their lending benchmarks. Central banks in New Zealand and Sweden each shaved 50 bps off their interest rates while the U.S. Federal Reserve and the Bank of England delivered 25 bps cuts. Policy makers in Australia and Norway decided to leave interest rates unchanged, while their peers in Switzerland, Japan, Canada and at the European Central Bank held no rate setting meetings.”
December 4 – Financial Times (Sam Fleming): “The OECD has warned central banks against cutting interest rates too fast, flagging the threat posed by ‘persistent’ inflation in the price of services. The… organisation said in its latest global outlook that the world economy was showing ‘remarkable resilience’, as it welcomed a continued retreat in overall price pressures following the severest bout of inflation for a generation. Its growth forecast for the US… was sharply upgraded to 2.4% next year, compared with 1.6% in its September outlook, driven by solid consumption and underpinned by ‘brisk’ wage growth. Central banks in most of the OECD economies have cut rates… But with services price inflation at a median of 4% across the group of rich nations, central banks could not afford to loosen their grip too much, the report said.”
Global Bubble Watch:
December 4 – Bloomberg (Craig Stirling): “The global economy faces proliferating risks ranging from trade tensions to wars and debt troubles that could threaten its ‘remarkable resilience’ of past years, the OECD said. Just weeks away from Donald Trump assuming the US presidency in January, the Paris-based club of rich economies applauded the world’s recent experience of stable growth and ebbing inflation, while warning that notable dangers are lurking on the horizon. ‘Robust overall performance masks significant differences across regions and countries, and is surrounded by important downside risks and uncertainties,’ OECD Chief Economist Alvaro Pereira wrote… ‘There are increasing risks related to rising trade tensions and protectionism, a possible escalation of geopolitical conflicts, and challenging fiscal policies in some countries.’”
December 6 – Reuters (Promit Mukherjee and Ismail Shakil): “Canada had 1.5 million unemployed people in November, propelling its jobless rate to a near-eight-year high outside of the pandemic era and boosting chances of a large interest rate cut on Dec. 11. The jobless rate rose to a more than expected 6.8% in November…, a rise of 1.7 percentage points since April 2023.”
Europe Watch:
December 2 – Reuters (Jonathan Cable): “Euro zone manufacturing activity fell sharply last month and a further decline in demand likely dashed any hopes for an imminent recovery after the sector had showed some signs of stabilisation in October… HCOB's final euro zone manufacturing Purchasing Managers’ Index (PMI)… sank to 45.2 in November… ‘These numbers look terrible. It’s like the euro zone's manufacturing recession is never going to end. As new orders fell fast and at an accelerated pace, there's no sign of a recovery anytime soon,’ said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank. ‘The downturn is widespread, hitting all of the top three euro zone countries. Germany and France are faring the worst, and Italy is not doing much better.’”
December 4 – Reuters (Jonathan Cable): “Business activity across the euro zone fell sharply last month as the bloc's dominant services sector joined the manufacturing sector in contracting… ‘The services sector, which had been holding up the overall economy, is now shrinking for the first time since January. This is bad news for overall growth prospects, especially since this weakness is seen across the top-three euro economies,’ said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.”
Japan Watch:
November 29 – Bloomberg (Toru Fujioka and Catarina Saraiva): “Bank of Japan Governor Kazuo Ueda said interest-rate hikes are ‘nearing’ as inflation and economic trends develop in line with the central bank’s forecasts, helping strengthen the yen without explicitly supporting an increase in December. ‘We will adjust the degree of monetary easing at the appropriate time if we become confident or certain that the economy will move as forecasted by our economic and price outlook — particularly that the underlying inflation rises toward 2%,’ Ueda said… The next rate hike is ‘nearing in the sense that economic data are on track,’ he said.”
December 2 – Bloomberg (Toru Fujioka): “Bank of Japan Governor Kazuo Ueda has plenty of data to support the case for raising the benchmark rate in December, an outcome that would mark the first tightening of policy three times in a calendar year since the peak of Japan’s asset bubble in 1989. The governor appears determined to weigh his options until the last minute before the Dec. 19 decision. He’ll sift through forthcoming numbers including the central bank’s Tankan survey on Dec. 13 and monitor the Federal Reserve’s own rate decision due several hours before the BOJ’s board sets policy. Still, expectations of a near-term move are rising.”
December 5 – Bloomberg (Erica Yokoyama): “Base salaries for regular workers in Japan rose by a record, a further indication of progress toward a positive economic cycle that will support market speculation of a near-term rate hike by the central bank. Base pay for full-time workers increased by 2.8% in October from a year ago, the biggest gain for comparable data back to 1994…”
Emerging Markets Watch:
December 2 – Reuters (Marcelo Teixeira): “Banks which financed two Brazilian coffee traders that last week sought court-supervised debt restructuring have a total of 1.1 billion reais ($181.6 million) in credit with the firms… The amount refers only to advance money the banks gave to traders Atlantica and Cafebras in contracts linked to future coffee exports… It is not known if the traders have other debt with roasters or coffee importers related to supply deals.”
Leveraged Speculation Watch:
December 2 – Bloomberg (Sridhar Natarajan, Nishant Kumar and Devika Krishna Kumar): “Ken Griffin’s Citadel is on track to defy a sluggish year for commodities trading across Wall Street, burnishing the hedge fund’s image as a dominant force in the asset class. Citadel’s commodities business generated about $4 billion of profit this year, driven by natural gas trading…”
December 2 – Wall Street Journal (Peter Rudegeair): “One of the oldest hedge-fund firms is seeing an exodus of investors after years of lackluster returns and executive turnover. Paloma Partners had so many investors ask to pull out their money that it decided to pay them partly in cash but mostly through the equivalent of IOUs… The firm said it didn’t have enough easy-to-sell assets on hand to immediately satisfy redemption requests while also maintaining diversification in its investment mix.”
Social, Political, Environmental, Cybersecurity Instability Watch:
December 5 – Wall Street Journal (Maitane Sardon): “Estimated global insured losses from natural catastrophes like hurricanes and floods are on track to exceed $135 billion in 2024, according to… the Swiss Re Institute. The research arm of the Swiss reinsurance firm said… 2024 is set to be the fifth consecutive year with losses from natural disasters and severe weather surpassing the $100-billion mark. The growing loss burden was mainly driven by the concentration of value in urban areas, economic growth and rising rebuilding costs, Swiss Re said, noting that climate change is playing an increasing role in the losses. The U.S. experienced two thirds of the insured losses, with Hurricane Helene and Hurricane Milton resulting in damages approaching $50 billion.”
December 4 – Financial Times (Miles Johnson and Suzi Ring): “A UK-led operation has uncovered a multibillion-dollar money laundering scheme run out of London, Moscow and Dubai that enabled Russian spies and European drug traffickers to evade sanctions using cryptocurrency. The UK’s National Crime Agency said… its ‘Operation Destabilise’ investigation centred on two companies — Smart and TGR — that acted as a financial hub for cash-rich global criminals and sanctioned individuals relying on cryptocurrency outside the banking system. The NCA said the network had been used by clients including the Kinahan cartel, Irish cocaine traffickers linked to numerous contract killings, as well as funding ransomware groups, and ‘Russian espionage operations’…”
Geopolitical Watch:
December 6 – Bloomberg (Soo-Hyang Choi and Sam Kim): “South Korean President Yoon Suk Yeol lost the support of a key ally, increasing the chances he’ll be impeached over his attempt to impose martial law in a vote likely to take place Saturday. In an abrupt U-turn on Friday, Han Dong-hoon — head of Yoon’s ruling People Power Party — called for the president to be suspended from office quickly. Citing credible evidence that Yoon ordered the arrest of key politicians on the night he declared martial law, Han told parliament it would be dangerous to allow the president to stay in office.”
December 4 – Bloomberg (Alastair Gale): “The potential impeachment of South Korea’s president after an aborted attempt to impose martial law may complicate US efforts to increase pressure on China under President-elect Donald Trump by undermining American-led alliances in East Asia. Since taking office in 2022, President Yoon Suk Yeol has steered South Korea away from economic dependence on China and bolstered trade with the US… At the same time, Yoon has broken through historical tensions with Japan to form closer military, diplomatic and economic ties. The strengthening US-South Korea-Japan relationship has been a key component of a broader Washington effort to stitch together partnerships across Asia seen as blunting Beijing’s ambitions. Yoon’s brief and botched attempt to declare martial law… is a ‘potentially huge setback’ to those efforts, said Richard McGregor, senior fellow… at the Lowy Institute…”
December 4 – Bloomberg (Cynthia Kim and Joyce Lee): “South Korea's Finance Ministry said… that the government will activate 40 trillion won ($28.35bn) worth of market stabilization fund, after President Yoon Suk Yeol's lifting of a martial law declaration affected financial markets. The Bank of Korea may purchase government bonds and expand repo operations if needed…”
December 4 – Financial Times (Miles Johnson and Suzi Ring): “A UK-led operation has uncovered a multibillion-dollar money laundering scheme run out of London, Moscow and Dubai that enabled Russian spies and European drug traffickers to evade sanctions using cryptocurrency. The UK’s National Crime Agency said… its ‘Operation Destabilise’ investigation centred on two companies — Smart and TGR — that acted as a financial hub for cash-rich global criminals and sanctioned individuals relying on cryptocurrency outside the banking system. The NCA said the network had been used by clients including the Kinahan cartel, Irish cocaine traffickers linked to numerous contract killings, as well as funding ransomware groups, and ‘Russian espionage operations’…”
Geopolitical Watch:
December 6 – Bloomberg (Soo-Hyang Choi and Sam Kim): “South Korean President Yoon Suk Yeol lost the support of a key ally, increasing the chances he’ll be impeached over his attempt to impose martial law in a vote likely to take place Saturday. In an abrupt U-turn on Friday, Han Dong-hoon — head of Yoon’s ruling People Power Party — called for the president to be suspended from office quickly. Citing credible evidence that Yoon ordered the arrest of key politicians on the night he declared martial law, Han told parliament it would be dangerous to allow the president to stay in office.”
December 4 – Bloomberg (Alastair Gale): “The potential impeachment of South Korea’s president after an aborted attempt to impose martial law may complicate US efforts to increase pressure on China under President-elect Donald Trump by undermining American-led alliances in East Asia. Since taking office in 2022, President Yoon Suk Yeol has steered South Korea away from economic dependence on China and bolstered trade with the US… At the same time, Yoon has broken through historical tensions with Japan to form closer military, diplomatic and economic ties. The strengthening US-South Korea-Japan relationship has been a key component of a broader Washington effort to stitch together partnerships across Asia seen as blunting Beijing’s ambitions. Yoon’s brief and botched attempt to declare martial law… is a ‘potentially huge setback’ to those efforts, said Richard McGregor, senior fellow… at the Lowy Institute…”
December 4 – Bloomberg (Cynthia Kim and Joyce Lee): “South Korea's Finance Ministry said… that the government will activate 40 trillion won ($28.35bn) worth of market stabilization fund, after President Yoon Suk Yeol's lifting of a martial law declaration affected financial markets. The Bank of Korea may purchase government bonds and expand repo operations if needed…”
