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November 2024. Future historians will look back in utter amazement. As for equities, strong market gains pushed all major averages further into record highs – the S&P500, Nasdaq Composite, Nasdaq100, mid-caps, small caps, and the “average stock” Value Line Arithmetic Index.
For the month, the S&P 500 returned 5.9%, and the Nasdaq 100 returned 5.3% – solid gains, but significantly lagging the broader market. The small cap Russell 2000 returned 11.0%, outpacing the S&P400 Mid Cap’s 8.8%. The Value Line Arithmetic returned 8.2%.
I have a hunch that the post-election financial stocks feeding frenzy will prove a challenge to reconcile in hindsight. For November, the KBW Bank Index returned 13.6%, the Regional Banks 14.8%, the Securities Broker/Dealers 13.7%, and the Nasdaq Financial Index 14.2%.
If nothing else, the big Trump win and Republican sweep triggered quite a short squeeze. The Goldman Sachs Most Short Index jumped 13.3% in November. Tesla surged a third – inflating market capitalization to $1.1 TN – or 20 times Ford and 16 times GM.
Stocks will do what stocks will do. Global bond markets, however, are the realm of analytical intrigue. Ten-year Treasury yields briefly touched 4.50% the week following the election. But yields ended November at 4.17%, down 12 bps for the month.
From a domestic perspective, it’s reasonable that a confluence of market exuberance (i.e., stocks, crypto…), record debt issuance, the loosest financial conditions in years, and prospects for larger deficits and trade war inflation risks under the Trump administration – would unsettle the bond market.
But there are clearly powerful global factors at play, pushing yields lower. For the month, 10-year Germany yields sank 30 bps, Spain 30 bps, Italy 38 bps and Greece 39 bps. Despite being in the market’s crosshairs, yields dropped 20 bps in the UK and 23 bps in France.
I do not dismiss big bond market moves. European yields reversed sharply lower soon after the U.S. election. Perhaps prospects for tariffs, trade wars, and global economic weakening explain slumping yields. It’s curious to see European yields lead on the downside. The escalating war in Ukraine, with Putin firing an experimental nuclear warhead-capable hypersonic ballistic missile – while revising Russia’s nuclear doctrine – points to a dangerous spike in geopolitical risk. Meanwhile, after a few months hiatus, political stability concerns are back on the boil in France.
November 29 – Bloomberg (Samy Adghirni and Ania Nussbaum): “Far-right leader Marine Le Pen, who holds outsize leverage in France’s split parliament, gave Prime Minister Michel Barnier until Monday to accede to her budget demands before she decides whether to topple the government. Le Pen’s National Rally is demanding that Barnier tweak his 2025 budget plans, which incorporates €60 billion ($63.5bn) of fiscal adjustments, to abandon a proposal to reduce drug reimbursements, call a moratorium on new or higher taxes on most individuals, to index pensions to inflation from Jan. 1 and to enact tougher migration and crime policies.”
France’s bond yield spread to Germany widened intraday Wednesday to 90 bps – the largest risk premium since the 2012 European debt crisis – before settling back down to 81 bps by Friday’s close. Also notable, French yields briefly traded above Greece this week. France’s sovereign CDS traded up to 40 bps in Wednesday trading – matching the level during the June election, which was the highest since the Covid crisis.
I refer to the “GLOBAL government finance Bubble” for good reason. Over-indebtedness is systemic. France ranks 7th globally by GDP and is high on the list for its heavy debt load. At 112%, France’s debt-to-GDP ratio has risen significantly since debt crisis year 2012’s 88%. Flouting the Eurozone’s 3% limit, France is expected to run a 2024 deficit of 6.2%. After gains by both the far right and far left in the summer’s parliamentary election, President Emmanuel Macron appointed Michel Barnier Prime Minister to lead a fragile coalition government.
Barnier is struggling to push through spending cuts and tax increases necessary to somewhat pare the big deficit, stating he is prepared to use a special constitutional provision to bypass a Parliamentary vote. But invoking “Article 49.3” risks a no-confidence vote from the opposition parties. There are ultimatums, and we’ll know more Monday.
Global worries are not limited to France’s government and bond market. The Japanese yen’s 1.2% Friday advance boosted the week’s gain to 3.4%. Higher inflation readings have the market now at two-thirds probability of a hike at the Bank of Japan’s December 19th meeting, up from only a third to begin November. Bloomberg: “Carry Traders Gird for Stressful Holiday With Wild Swings in Yen.”
Yen “carry trade” worries have returned. For the week versus the yen, the Brazilian real dropped 5.9%, the Russian ruble 5.2%, the Argentine peso 3.8%, the Turkish lira 3.6%, the Colombian peso 3.6%, the Indian rupee 3.3%, and the Chinese renminbi 3.2%.
November 29 – Bloomberg (Giovanna Bellotti Azevedo and Leda Alvim): “Brazilian markets were on pace for the worst week in two years after a much awaited plan to cut government spending only added to angst over the country’s budget. The real slid as much as 1.6% Friday… It’s down almost 5% this week, by far the worst performer in developing nations… Investors have rushed to dump Brazil assets this year amid concern over the nation’s growing debt levels as President Luiz Inacio Lula da Silva increases spending to fulfill pledges of improving living standards for poor Brazilians.”
After sinking almost 5% in three sessions to a record low, Brazil’s currency recovered somewhat in late Friday trading to end the week down 2.8%. Brazil’s local currency bond yields traded above 14% (multi-year high) in chaotic Friday trading, before closing the session at 13.44% – up 57 bps for the week. Brazil CDS rose eight this week to 163 bps. Brazil’s Ibovespa equities index dropped 2.7%, trading this week to the lows since early July.
Other EM headlines: “Mexico’s President Says She’s Sure Country Can Avoid US Tariffs.” “India’s Growth Shocker Puts Pressure on RBI to Cut Rates.” “Turkey Economy Slides Into Recession Ahead of Rates Decision.” “Bank of Russia Says No Emergency Steps Needed to Stabilize Ruble.” “Russia Tries to Stem Panic Over the Plummeting Ruble, as the Central Bank is Forced to Intervene.”
November 29 – El Pais (Cristian Segura): “The Russian ruble has once again plunged to levels not seen since the early days of the Kremlin’s war against Ukraine. After a gradual decline throughout November and a sharp drop during this week’s ‘Black Wednesday,’ the currency stabilized on Thursday at 109.5 rubles per dollar… This marks its weakest rate since March 2022, when the initial wave of Western sanctions caused the ruble to briefly plummet beyond 140 rubles per euro. Prior to the invasion, the ruble traded around 80 per euro, and a decade ago — before the illegal annexation of Crimea — it was under 40… ‘It is not easy, neither in our country nor in neighboring countries, but everything is under control, everything is going according to plan,’ Russian President Vladimir Putin claimed.”
The Russian ruble was down as much as 7% in Wednesday trading, before central bank intervention helped cut the week’s losses to 2.8%. The fragile ruble will force even tighter policies from the Bank of Russia, only exacerbating economic weakness. Intensifying pressures – on the battlefield and in the currency market – heighten fears of Putin resorting to increasingly desperate measures.
I’ll have to admit that my analytical interests are piqued when I see troubling Ukraine War developments, European bond yields leading on the downside, a weak euro currency, and a quick 7% plunge in the ruble. And then the abruptly strengthening yen places renewed pressure on “carry trade” leverage.
A month to go to book spectacular 2024 market gains – a month away from ensuring big Wall Street year-end bonuses and huge hedge fund payouts. Troubling geopolitical developments – though sinking global bond yields do place downward pressure on Treasury yields. And lower market yields underpin equities speculation, especially in the U.S.
November 25 – Bloomberg (Amara Omeokwe): “Federal Reserve Bank of Chicago President Austan Goolsbee said he foresees the central bank continuing to lower rates toward a stance that neither restricts nor promotes economic activity. ‘Barring some convincing evidence of overheating, I don’t see the case for not continuing to have the fed funds rate decline,’ Goolsbee said… ‘How fast that happens will be determined by the outlook and conditions… But the through line to me is pretty clear that we’re on a path, and that path is going to lead to lower rates, closer to what you might call neutral.’”
“Convincing evidence of overheating”? The KBW Bank Index has returned 48.2% y-t-d, with the Broker/Dealers returning 54.1%. The S&P500 has a y-t-d return of 28.1%. Annual issuance records are being crushed throughout fixed income. Investment-grade spreads recently traded the narrowest since 1998. A $1.83 TN fiscal 2024 federal deficit. Booming Credit – “private Credit,” “private equity,” M&A, ABS, “buy now, pay later”…
Overheating throughout the financial realm is rather conspicuous. Goolsbee, of course, would instead focus on the real economy when arguing against overheating. But a Bubble economy so maladjusted by price distortions, resource misallocation, and inequitable wealth redistribution is not inclined to traditional economy-wide overheating.
The “Periphery to Core” analytical framework informs us that the “Core” often enjoys an initial boost from fledgling stress at the “Periphery.” Lower market yields are the last thing the overheated “Core” needs at this juncture. Is the Fed really going to cut rates again on the 18th? Quite interestingly, the expected Fed policy rate for December 2025 sank 48 bps this week to 3.45% (two-year Treasury yields down 22bps this week). As for the ECB policy rate, market expectations for October 2025 dropped 18 bps this week to 1.48%. Something’s up.
Meanwhile, the “Core” has a new administration hankering to brandish tariffs over the entire world. On so many levels, extraordinary instability festers below the surface. It was as if initial lava flows appeared this week.
November 22 – Financial Times (Colby Smith, Joshua Franklin and Stephen Gandel): “The sell-off in US equities in early August showed that highly leveraged hedge funds operating in a low-liquidity environment could magnify market shocks, the Federal Reserve said… Financial markets fell sharply in the first week of August in what was seen then as a reflection of concerns over the US economy and rising interest rates in Japan, which turned against investors who had borrowed cheaply in yen in a popular trade known as the yen carry. In a report, the Fed blamed August’s sudden jump in market volatility in part on ‘highly leveraged hedge funds’ quickly selling down their positions to meet internal volatility targets… ‘During this event, liquidity in the Treasury market, as well as in other markets, deteriorated markedly, but market conditions improved rapidly following favourable data releases the following week,’ the Fed wrote… ‘Nevertheless, this episode showed once again how high leverage can amplify adverse shocks.’”
For the Week:
The S&P500 gained 1.1% (up 26.5% y-t-d), and the Dow rose 1.4% (up 19.2%). The Utilities jumped 2.1% (up 27.2%). The Banks added 0.5% (up 43.3%), and the Broker/Dealers were slightly positive (up 52.3%). The Transports advanced 1.4% (up 10.8%). The S&P 400 Midcaps increased 0.7% (up 21.0%), and the small cap Russell 2000 gained 1.2% (up 20.1%). The Nasdaq100 added 0.7% (up 24.4%). The Semiconductors slipped 0.6% (up 18.0%). The Biotechs jumped 3.0% (up 10.7%). With bullion down $73, the HUI gold index fell 2.3% (up 23.8%).
Three-month Treasury bill rates ended the week at 4.375%. Two-year government yields dropped 22 bps to 4.15% (down 10bps y-t-d). Five-year T-note yields sank 25 bps to 4.05% (up 20bps). Ten-year Treasury yields fell 23 bps to 4.17% (up 29bps). Long bond yields dropped 23 bps to 4.36% (up 33bps). Benchmark Fannie Mae MBS yields sank 23 bps to 5.51% (up 54bps).
Italian 10-year yields dropped 23 bps to 3.28% (down 42bps y-t-d). Greek 10-year yields tumbled 21 bps to 2.91% (down 15bps). Spain’s 10-year yields fell 18 bps to 2.79% (down 20bps). German bund yields declined 15 bps to 2.09% (up 6bps). French yields fell 15 bps to 2.90% (up 34bps). The French to German 10-year bond spread widened slightly to 81 bps. U.K. 10-year gilt yields dropped 14 bps to 4.24% (up 71bps). U.K.’s FTSE equities index added 0.3% (up 7.2% y-t-d).
Japan’s Nikkei 225 Equities Index slipped 0.2% (up 14.2% y-t-d). Japanese 10-year “JGB” yields declined four bps to 1.05% (up 43bps y-t-d). France’s CAC40 dipped 0.3% (down 4.1%). The German DAX equities index gained 1.6% (up 17.2%). Spain’s IBEX 35 equities index was little changed (up 15.2%). Italy’s FTSE MIB index slipped 0.2% (up 10.1%). EM equities were mostly lower. Brazil’s Bovespa index sank 2.7% (down 6.3%), and Mexico’s Bolsa index declined 1.2% (down 13.2%). South Korea’s Kospi dropped 1.8% (down 7.5%). India’s Sensex equities index added 0.9% (up 10.5%). China’s Shanghai Exchange Index rallied 1.8% (up 11.8%). Turkey’s Borsa Istanbul National 100 index added 1.1% (up 29.2%).
Federal Reserve Credit declined $18.7 billion last week to $6.874 TN. Fed Credit was down $2.016 TN from the June 22, 2022, peak. Over the past 272 weeks, Fed Credit expanded $3.147 TN, or 84%. Fed Credit inflated $4.063 TN, or 145%, over the past 629 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt dipped $2.9 billion last week to $3.318 TN. “Custody holdings” were down $79 billion y-o-y, or 2.3%.
Total money market fund assets rose $26.5 billion to $6.675 TN. Money funds were up $540 billion over 17 weeks (27% annualized) and $789 billion y-t-d (14.5% ann.).
Total Commercial Paper gained $11.0 billion to $1.185 TN. CP was down $90 billion, or 7.1%, over the past year.
Freddie Mac 30-year fixed mortgage declined six bps this week to 6.81% (down 23bps y-o-y). Fifteen-year rates rose eight bps to 6.10% (down 43bps). Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates down 17 bps to a six-week low 7.15% (down 48bps).
Currency Watch:
November 26 – New York Times (Keith Bradsher): “Beijing has a powerful tool for responding to President-elect Donald J. Trump’s threatened new tariffs on Chinese goods: It could start a currency war, a step that poses formidable risks for China as well as the United States. Letting China’s currency, the renminbi, lose value against the dollar would be a tried and true answer to tariffs. A cheaper renminbi would make Chinese exports less expensive for overseas buyers, mitigating the harm to China’s competitiveness from Mr. Trump’s tariffs. Beijing did just that in 2018 and 2019, when Mr. Trump imposed tariffs in his first term.”
November 25 – Bloomberg (Chongjing Li): “A key level is starting to emerge for the yuan, as China tightens its grip on a currency that is facing fresh tariff threats from US President-elect Donald Trump. The People’s Bank of China has consistently set its daily reference rate — Beijing’s preferred tool to guide yuan expectations — stronger than 7.2 per dollar since the US election, despite wild swings in the greenback and increasing predictions by analysts that the central bank would buckle.”
For the week, the U.S. Dollar Index fell 1.7% to 105.74 (up 4.3% y-t-d). For the week on the upside, the Japanese yen increased 3.4%, the British pound 1.6%, the euro 1.5%, the Swiss franc 1.5%, the New Zealand dollar 1.4%, the Swedish krona 1.3%, the South Korean won 0.6%, the Singapore dollar 0.5%, the Norwegian krone 0.4%, the South African rand 0.3%, the Mexican peso 0.3%, and the Australian dollar 0.2%. On the downside, the Brazilian real declined 2.8%, and the Canadian dollar eased 0.2%. The Chinese (onshore) renminbi slipped 0.02% versus the dollar (down 2.02% y-t-d).
Commodities Watch:
November 27 – Bloomberg (Peter Laca, Agnieszka Barteczko, and Misha Savic): “Earlier this year, the Czech Republic’s central bank chief flew to London to have a look at a swelling stack of gold bars stored in the Bank of England’s concrete-encased vaults beneath Threadneedle Street. Ales Michl’s mission to inspect the precious metal held for the Czech National Bank was part of the governor’s stated ambition to double the country’s stockpile to 100 metric tons in the next three years. It’s increased fivefold since he took office in 2022… ‘We need to reduce volatility,’ Michl, who grew animated when queried on the subject, told Bloomberg… The Czech policymaker isn’t alone in accelerating bullion purchases. Peers from Warsaw to Belgrade are joining the gold rush as a way to diversify investments and bet on future price increases, making eastern Europe one of the biggest buyers of the metal and helping to drive the gold rally. Central banks around the world are stocking their gold arsenals as a shield against external shocks…”
The Bloomberg Commodities Index declined 0.8% (down 0.5% y-t-d). Spot Gold slumped 2.7% to $2,643 (up 28.1%). Silver declined 2.3% to $31.3457 (up 28.7%). WTI crude dropped $3.24, or 4.5%, to $68.00 (down 5%). Gasoline sank 5.7% (down 8%), while Natural Gas jumped 7.5% to $3.363 (up 34%). Copper slipped 0.2% (up 6%). Wheat fell 2.2% (down 15%), and Corn declined 0.6% (down 10%). Bitcoin dropped $2,160, or 2.2%, to $96,620 (up 127%).
Trump Administration Watch:
November 25 – Wall Street Journal (Natalie Andrews and Andrew Restuccia): “President-elect Donald Trump pledged that soon after taking office he will slap steep tariffs on Mexico and Canada, two of America’s closest allies, as well as China, the clearest indication since his election victory that he plans to follow through on the tough campaign rhetoric that helped propel him to the White House… Trump said that on the first day of his presidency he will charge Mexico and Canada a 25% tariff on all products coming into the U.S. He added in a separate social-media post that he would impose an additional 10% tariff on all products that come into the U.S. from China… Such a tariff would come on top of existing tariffs the U.S. has already imposed on Chinese goods.”
November 26 – New York Times (Ana Swanson): “President-elect Donald J. Trump’s threats to impose damaging tariffs on Canada, Mexico and China may ultimately be an opening wager to try to use the power of the American market to persuade other countries to stem a flow of drugs and migrants across U.S. borders. But even if the threat to impose vast tariffs on some of the world’s largest economies is a negotiating tactic, it is also a gambit that has immediate real-world consequences. Before Mr. Trump even sets foot in the Oval Office, his threat to put tariffs on America’s three largest trading partners on his first day in office was reverberating around the world, shocking international businesses, rocking diplomatic relationships and calling into question two big trade deals that Mr. Trump negotiated during his first term.”
November 22 – CNN (Juliana Liu): “In the summer of 2018, when former President Donald Trump launched a trade war with Beijing, the Chinese economy was riding high. There was even talk it could soon overtake the United States as the world’s largest… Armed with an understanding about the way the president-elect operates, the Chinese leadership is better equipped to deal with the real possibility of Trump making good on his promise to impose upwards of 60% tariffs on goods sold to the United States, according to economists and analysts, through a combination of trade diversification, targeted retaliation against US companies and support for domestic consumption. ‘China has been preparing for this day for quite some time. The US is much less important to its trade network (than it was before),’ said Dexter Roberts, author of the Trade War newsletter and a senior fellow at the Atlantic Council.”
November 26 – Wall Street Journal (Jason Douglas, Anthony Harrup and José de Córdoba): “Donald Trump’s new tariff pledges send a clear signal that he wants to rewrite the terms of North America’s free-trade pact and follow through with plans to hit China with tariffs, demonstrating to allies and adversaries alike that he is serious about renewing confrontation over a global trading system that he believes costs the U.S. dearly… Trump said he would levy tariffs of 25% on imports of all goods from Mexico and Canada, accusing both countries of facilitating illegal immigration and fentanyl abuse in the U.S. The Mexican peso fell 1.4% against the dollar in Asian trading Tuesday, while the Canadian dollar lost 1%.”
November 26 – Wall Street Journal (Greg Ip): “When President-elect Donald Trump said he would nominate the hedge-fund manager Scott Bessent as his Treasury secretary…, much of Wall Street and corporate America breathed a sigh of relief. The choice of Bessent, who is hawkish on deficits, a defender of the dollar’s reserve status, and until recently circumspect about tariffs, suggested that Trump would put a priority on market-friendly measures to boost economic growth and hold down inflation and interest rates. The relief lasted just 72 hours. Trump’s announcement… that he would slap tariffs of 25% on Canada and Mexico on his first day in office and an additional 10% on China until illegal immigrants and fentanyl stop entering the U.S. dispelled any doubt that he would govern as he campaigned—as a disruptive populist. The lesson is that the most important member of Trump’s economic team is Trump himself. ‘In his first term, there was a lot of bluster that ended up getting walked back,’ Andy Laperriere, policy analyst at Piper Sandler, said… ‘We expect plenty of bluster but more follow through in a second term because most of his staff is generally not going to try to talk him out of things like this.’”
November 26 – Bloomberg (Robert Burgess): “Treasury Secretary Janet Yellen came under fire this year from economists such as Nouriel ‘Dr. Doom’ Roubini for stepping up the issuance of short-term Treasury bills. They essentially accused Yellen of undertaking the strategy in a deliberate effort to reduce the share of long-term Treasury notes and bonds, thereby suppressing borrowing costs and artificially juicing the economy in an election year. My… colleague Jonathan Levin thoroughly debunked that conspiracy theory a few months ago. Nevertheless, the debt management approach is not without… consequences that will surely give Donald Trump’s pick for Treasury secretary, Scott Bessent, many sleepless nights… The decision to boost issuance of very short-term debt means an unusually high amount of borrowing comes due next year — $6.74 trillion as of this writing. That represents about a quarter of the $28 trillion of total marketable US government debt outstanding.”
November 24 – Associated Press (Josh Boak and Fatima Hussein): “Donald Trump has big plans for the economy — and a big debt problem that will be a hurdle to delivering on them. Trump has bold ideas on tax cuts, tariffs and other programs, but high interest rates and the price of repaying the federal government’s existing debt could limit what he’s able to do. Not only is the federal debt at roughly $36 trillion, but the spike in inflation after the coronavirus pandemic has pushed up the government’s borrowing costs such that debt service next year will easily exceed spending on national security. The higher cost of servicing the debt gives Trump less room to maneuver with the federal budget as he seeks income tax cuts.”
November 25 – Axios (Neil Irwin): “The centerpiece of Treasury secretary nominee Scott Bessent’s economic agenda is what he calls a ‘3/3/3’ approach to policy: cutting the budget deficit to 3% of GDP, achieving 3% annual growth, and increasing domestic oil production by 3 million barrels per day. If achieved, these goals would result in a more sustainable fiscal picture, paired with much faster growth than is projected under most mainstream forecasts. But they are in tension with other aspects of President-elect Trump’s agenda. How those tensions are resolved — and particularly how Bessent’s pro-market impulses fare in internal battles over tariffs, immigration and more — will shape the economy and fiscal picture for years to come.”
November 27 – Bloomberg: “President-elect Donald Trump’s pick for the top trade position sees China as a ‘generational challenge’ to the US and has advocated for a strategic decoupling from the country. Jamieson Greer, who’s been nominated as the US Trade Representative, played a key role in imposing tariffs on China during Trump’s first term. As former chief of staff to Robert Lighthizer, who was Trump’s trade representative then, Greer shares a tough stance on Beijing… In his May testimony before the US-China Economic and Security Review Commission, Greer provided a roadmap for the policies the new administration might pursue, including action to prevent Chinese companies from relocating to other countries to dodge US tariffs. ‘There is no silver bullet, and in some cases the effort to pursue strategic decoupling from China will cause short-term pain,’ he said. ‘However, the cost of doing nothing or underestimating the threat posed by China is far greater.’”
November 25 – New York Times (Alan Rappeport and Ana Swanson): “When Donald J. Trump first ran for the White House in 2016, his closing campaign advertisement lamented the influence of Wall Street in Washington, flashing ominous images of big banks and the billionaire liberal philanthropist George Soros. Now, as president-elect, Mr. Trump has tapped two denizens of Wall Street to run his economic agenda. Scott Bessent, who invested money for Mr. Soros for more than a decade, is his pick for Treasury secretary, and Howard Lutnick, the chief executive of Cantor Fitzgerald, will be nominated to lead the Commerce Department. Mr. Trump’s choices to lead his economic team show the prominence of billionaire investors in setting an agenda that is supposed to fuel a ‘blue-collar boom’ but that skeptics think will mostly benefit the rich.”
November 24 – Bloomberg: “Scott Bessent… told the Wall Street Journal that he’ll focus on following through on the president-elect’s tax cut and tariff pledges once he takes office. Putting tariffs in place and reducing spending will also be a focus, Bessent said, though he didn’t go into detail… Trump has threatened to hit Chinese shipments with tariffs of 60%… The veteran hedge fund manager added that he’ll work at ‘maintaining the status of the dollar as the world’s reserve currency,’ according to the report.”
Trade War Watch:
November 26 – Wall Street Journal (Alexander Ward): “President-elect Donald Trump’s brandishing of tariffs on goods from Canada, Mexico and China marks the passage from one era to another: Partnerships are out, and coercion is in. Trump is showing his second term will be much like his first, defined by the economic and diplomatic fights he picked with friends as well as foes. His punitive use of tariffs to bend others to his will is a far cry from the pains the Biden administration took to forge agreements and build consensus on policy in Europe and Asia. The president-elect has long taken strong positions with the goal of cowing negotiating partners. It is part of the playbook he used during his first term to confront Iran’s aggression and North Korea’s nuclear program. In the end, his ‘maximum pressure’ strategy produced mixed results: Iran was strangled financially but continued supporting proxies in the Middle East, and North Korea grew and advanced its nuclear arsenal.”
November 27 – Associated Press (Rob Gillies): “Canada is already examining possible retaliatory tariffs on certain items from the United States should President-elect Donald Trump follow through on his threat to impose sweeping tariffs on Canadian products, a senior official said… Trump has threatened to impose tariffs on products from Canada and Mexico if the countries don’t stop what he called the flow of drugs and migrants across southern and northern borders. He said he would impose a 25% tax on all products entering the U.S. from Canada and Mexico as one of his first executive orders. A Canadian government official said Canada is preparing for every eventuality and has started thinking about what items to target with tariffs in retaliation.”
November 27 – Reuters (Sarah Morland and Brendan O’Boyle): “Mexican President Claudia Sheinbaum… warned U.S. President-elect Donald Trump of dire economic consequences for both countries from tariffs and suggested possible retaliation following his threat of across-the-board tariffs of 25% on Mexico and Canada. ‘One tariff will follow another in response and so on, until we put our common businesses at risk,’ Sheinbaum said in a letter to Trump, which she read aloud in a press conference, warning that tariffs would cause inflation and job losses in both countries.”
November 27 – Reuters: “Mexican President Claudia Sheinbaum said… Mexico would raise tariffs on imports from the United States if President-elect Donald Trump follows through on his threat to issue a 25% tariff on Mexican imports after taking office. ‘If there are U.S. tariffs, Mexico would also raise tariffs,’ Sheinbaum said…, adding that doing so would allow ‘benefits’ for Mexico in the event of tariffs from Washington.”
November 26 – Reuters (Eric Beech): “Neither the United States nor China would win a trade war, the Chinese Embassy in Washington said…, after U.S. President-elect Donald Trump threatened to slap an additional 10% tariff on all Chinese imports when he takes office on Jan. 20. ‘About the issue of US tariffs on China, China believes that China-US economic and trade cooperation is mutually beneficial in nature,’ Chinese Embassy Spokesperson Liu Pengyu said… ‘No one will win a trade war or a tariff war,’ Liu said.”
November 26 – Bloomberg (Joe Cash): “China’s state media warned U.S. President-elect Donald Trump his pledge to slap additional tariffs on Chinese goods over fentanyl flows could drag the world’s top two economies into a mutually destructive tariff war… Editorials in Chinese communist party mouthpieces China Daily and the Global Times late on Tuesday warned the next occupant of 1600 Pennsylvania Avenue to not make China a ‘scapegoat’ for the U.S.’ fentanyl crisis or ‘take China’s goodwill for granted regarding anti-drug cooperation’. ‘The excuse the president-elect has given to justify his threat of additional tariffs on imports from China is farfetched,’ China Daily said. ‘There are no winners in tariff wars. If the U.S. continues to politicise economic and trade issues by weaponising tariffs, it will leave no party unscathed.’”
November 27 – Reuters (Alexandra Stevenson and Paul Mozur): “In the world of cheap drones, Skydio was the great American hope. Its autonomous flying machines gave the U.S. defense and police agencies an alternative to Chinese manufacturers, free from the security concerns tied to dependence on Chinese supply chains. But Skydio’s vulnerabilities came into sharp focus days before the U.S. presidential election, when the Chinese authorities imposed sanctions and severed the company’s access to essential battery supplies. Overnight… Skydio, the largest American maker of drones, scrambled to find new suppliers. The move slowed Skydio’s deliveries to its customers, which include the U.S. military. ‘This is an attack on Skydio, but it’s also an attack on you,’ Adam Bry, the chief executive, told customers. Behind the move was a message from China’s leaders to Donald J. Trump, who would go on to win the election with a promise of new China sanctions and tariffs: Hit us and we’ll strike back harder.”
Ukraine War Watch:
November 26 – Reuters (Guy Faulconbridge and Lidia Kelly): “Russian forces are advancing in Ukraine at the fastest rate since the early days of the 2022 invasion, taking an area half the size of London over the past month, analysts and war bloggers said… Russian troops swept through swathes of Ukraine in early 2022 before being pushed back to its east and south. The 620-mile front line has been largely static for two years, until the latest, smaller-scale advances that began in July. The war is entering what some Russian and Western officials say could be its most dangerous phase, with Russia reported to be using North Korean troops in Ukraine and Kyiv now using Western-supplied missiles to strike back inside Russia.”
November 26 – Financial Times (Christopher Miller and Isobel Koshiw): “A North Korean general was injured and several officers sent by Pyongyang to Russia’s Kursk region were killed last week when Ukraine launched British-supplied Storm Shadow missiles at a Russian command centre, according to a Ukrainian official. The official said the strike, which hit the town of Marino, was one of ‘several’ that have targeted the North Koreans in the Kursk region over the past week, also using other weapons. Ukrainian forces were actively searching for more positions where the North Koreans were present, noting that they had been spread out, he added.”
November 28 – Financial Times (Isobel Koshiw, Christopher Miller and Anastasia Stognei): “Vladimir Putin has threatened to use Russia’s new ballistic missile to turn targets in Kyiv ‘to dust’, as his forces used cluster munitions against Ukraine’s energy infrastructure on Thursday. The president said such a strike with the Oreshnik missile would be in response to Ukraine using western long-range missiles to hit targets within Russia. ‘At present, the ministry of defence and the general staff are selecting targets to hit on Ukrainian territory. These could be military facilities, defence and industrial enterprises, or decision-making centres in Kyiv,’ said Putin… He added the Oreshnik missile Moscow first deployed last week in a strike on Dnipro could destroy highly protected underground sites and Russia had commenced its serial production.”
November 28 – Associated Press (Hanna Arhirova and Barry Hatton): “Russia conducted a ‘massive’ attack against Ukraine’s energy infrastructure on Thursday, firing nearly 200 missiles and drones and leaving more than a million households without power… Russia’s second major aerial attack on Ukraine’s power grid in less than two weeks amplified fears that the Kremlin aims to cripple the country’s power generation capacity before winter. ‘Attacks on energy facilities are happening all over Ukraine,’ Energy Minister Herman Halushchenko said…”
November 29 – Bloomberg (Soo-Hyang Choi): “Russian Defense Minister Andrey Belousov talked with his counterpart in North Korea on Friday, stoking concerns over deepening military cooperation between Pyongyang and Moscow while Russian jets flying nearby South Korea added to the mounting tensions. ‘During the official visit of the Russian Defense Minister, meetings with the military and military-political leadership of the DPRK are planned,” the Russian Defense ministry said…”
Middle East War Watch:
November 28 – Reuters (Francois Murphy): “Iran has informed the U.N. nuclear watchdog that it plans to install more than 6,000 extra uranium-enriching centrifuges at its enrichment plants and bring more of those already in place online, a confidential report by the watchdog said… The International Atomic Energy Agency report… details what Iran meant when it said it would add thousands of centrifuges in response to a resolution against it that the IAEA’s 35-nation Board of Governors passed last week at the request of Britain, France, Germany and the United States.”
Market Instability Watch:
November 27 – Financial Times (Ian Smith and Leila Abboud): “French sovereign bonds and stocks fell on Wednesday as concerns intensified among investors that a dispute over a belt-tightening draft budget could bring down Prime Minister Michel Barnier’s government. The sell-off pushed the gap between 10-year French borrowing costs and those of Germany to as high as 0.9 percentage points, a level not reached since the Eurozone crisis in 2012… Barnier is seeking to pass a budget with €60bn of spending cuts and tax increases despite his lack of a working majority in parliament. He has confirmed he will have to use a constitutional tool to override lawmakers to do so, a move that will expose him to a no-confidence vote that could bring down his government along with its budget. ‘The sell-off is on fears over a potential collapse of the Barnier government,’ said Gareth Hill, a bond fund manager at Royal London Asset Management. If the budget was not passed, the challenge of bringing France’s debt load down would become ‘even harder’, he added.”
November 27 – Bloomberg (Julien Ponthus and Steven Arons): “France’s banking stocks slid on Wednesday, lagging further behind European peers, as a political standoff sent a measure of French bond risk to levels last seen during the euro-area debt crisis. BNP Paribas SA — the country’s largest lender by market capitalization — fell as much as 3% while Societe Generale SA declined 4.4% and Credit Agricole SA slipped 2.8%, putting them among the worst performers across European financials.”
November 27 – Financial Times (Ian Smith, Laurence Fletcher, Philip Stafford, Leila Abboud and Adrienne Klasa): “France’s borrowing costs have risen above those of Greece for the first time, as investors fret that Michel Barnier’s government could fail to pass a belt-tightening budget. The 10-year yield on French government debt briefly reached 3.02% in early trading on Thursday, crossing above the 3.01% yield demanded by lenders to Greece… The crossover reflects an upheaval in the perceived riskiness of Eurozone borrowers and underscores investors’ concern about France’s political and fiscal outlook at a time when Barnier’s minority administration is struggling to push through €60bn of tax increases and spending cuts. ‘Looks like French politics are about to collide with the bond market,’ said Andrew Pease, chief investment strategist at Russell Investments, as he suggested that market turmoil would eventually force politicians to accept fiscal discipline. ‘I think we know who wins.’”
November 29 – Bloomberg (Laura Noonan and Greg Ritchie): “The Bank of England warned that hedge funds, asset managers and pension providers could be ‘underprepared’ in times of crisis, using the results of its review to push for international efforts to handle the growing risks in non-banking. The BOE has spent over a year examining how banks and other market participants would respond to a ‘sudden, sharp, shock to global financial markets,’ in the first global initiative of its kind… The BOE highlighted issues in repo financing markets, where regulators vowed to carry out ‘further work’ to increase resilience, and the sterling corporate bond market. In repo markets, where hedge funds borrow tens of billions, the BOE said banks were ‘unlikely to provide all of the additional financing NBFIs ask for’ and could ‘tighten terms for maturing financing’ even when banks had ample capacity to lend and were themselves drawing on central bank facilities.”
November 25 – Bloomberg (Caleb Mutua): “Stronger US growth, higher inflation and higher interest rates under President-elect Donald Trump could lead to a ‘substantial’ dose of rate volatility, damage a supportive credit technical backdrop and eat into returns, according to Deutsche Bank AG analysts. The outlook for financial and geopolitical world is now far from ‘business as usual’ following Trump’s election victory and the Republican sweep in Congress, opening up a wider range of outcomes for financial markets, analysts including Jim Reid and David Folkerts-Landau wrote… Recent Fed cuts are already starting to kick off a credit cycle and the removal of election uncertainty plus future pro-growth Trump policies could easily boost employment and inflation above expectations, they added. ‘Simply put, a hawkish Fed pivot is near,’ they wrote. ‘The risk of an over-heating US cycle is under-priced.’”
Global Credit Bubble Watch:
November 28 – Bloomberg (Helene Durand, Ronan Martin and ‘Tofe Ayeni): “European bond issuance has reached a record-breaking €1.705 trillion ($1.8 trillion) this year, passing the high-water mark previously set in 2020… Sovereigns, supranationals and agencies as well as financials have been at the forefront of the borrowing spree. The need to finance ever-growing debt piles has spurred issuance from public sector borrowers, with the UK being a case in point.”
AI Bubble Watch:
November 23 – CNBC (Spencer Kimball): “The power needs of artificial intelligence and cloud computing are growing so large that individual data center campuses could soon use more electricity than some cities, and even entire U.S. states, according to companies developing the facilities. The electricity consumption of data centers has exploded along with their increasingly critical role in the economy in the past 10 years, housing servers that power the applications businesses and consumers rely on for daily tasks. Now, with the advent of artificial intelligence, data centers are growing so large that finding enough power to drive them and enough suitable land to house them will become increasingly difficult, the developers say. The facilities could increasingly demand a gigawatt or more of power — one billion watts — or about twice the residential electricity consumption of the Pittsburgh area last year.”
Bubble and Mania Watch:
November 27 – Axios (Courtenay Brown): “Where Wall Street analysts see caution, Americans see the good times rolling. While it’s a historically safe bet that stocks will rise over the long term, record bullish sentiment may signal more economic optimism than we’ve seen of late. By the numbers: The largest share of consumers ever, at 56%, say the stock market will keep rising into next year, the Conference Board said… — topping the previous monthly record we told you about in October. Strategists also anticipate higher stock prices in 2025, though how much higher is a point of contention. They warn that endless uncertainties — trade wars, economic slowdowns, Fed policy — could make markets more vulnerable than usual to a pullback.”
November 26 – Bloomberg (Caleb Mutua): “JPMorgan expects a ‘perfect for credit’ scenario of yields above 5%, increased overseas demand, less net supply and credit fundamentals that remain in good shape to keep investment-grade spreads tight next year. Analysts at the bank expects spreads on the JPMorgan US Liquid Index (JULI) to move lower to a new all-time tight of 80 bps or 15 bps tighter than current levels. ‘The high-grade market has been in a new paradigm of historically high and relatively stable yields for the last two years, with tighter spreads ensuing,’ JPM analysts including Eric Beinstein and Nathaniel Rosenbaum wrote… ‘We don’t see these forces abating next year.’ Spreads on the equivalent Bloomberg high-grade bond index are hovering near the tightest level since May 1998…”
November 25 – Bloomberg (Fareed Sahloul): “Dealmakers got their first real taste of a post-US election M&A bump on Monday, with roughly $35 billion worth of transactions struck in sectors ranging from banking to building materials. The largest announcement came in the US, where Quikrete Holdings Inc. has agreed to acquire Summit Materials Inc. for about $11.5 billion including debt… Monday’s haul brings global deal values to within touching distance of $3 trillion for the year, data compiled by Bloomberg show.”
November 25 – Bloomberg (Craig Trudell): “Tesla Inc.’s post-election stock surge has more to do with market exuberance than actual improvement in the fundamentals of its business, UBS Group AG analysts cautioned in a report… While policy proposals have emerged since President-elect Donald Trump’s victory that could favor Tesla, analysts led by Joseph Spak wrote that the changes wouldn’t be absolute positives for the company… ‘The rise in Tesla stock is mostly driven by animal spirits/momentum,’ Spak wrote in the report.”
November 25 – Reuters (Purvi Agarwal and Johann M Cherian): “The Russell 2000 index tracking small cap companies in the U.S. hit a record high on Monday, boosted by expectations of tax cuts under a second Donald Trump administration, along with the prospect of lower borrowing costs.”
November 29 – Reuters (Gaurav Dogra and Patturaja Murugaboopathy): “Global investors stepped up purchases in equity funds in the week ended Nov. 27… Investors pumped a substantial $12.19 billion into global equity funds, a jump of 32% compared with about $9.24 billion worth of net acquisitions in the week before, LSEG Lipper data showed. It marked the ninth consecutive weekly inflow.”
U.S./Russia/China/Europe Watch:
November 27 – Wall Street Journal (Bojan Pancevski): “A Chinese commercial vessel that has been surrounded by European warships in international waters for a week is central to an investigation of suspected sabotage that threatens to test the limits of maritime law — and heighten tensions between Beijing and European capitals. Investigators suspect that the Yi Peng 3 bulk carrier — 225 meters long, 32 meters wide and loaded with Russian fertilizer — deliberately severed two critical data cables last week as its anchor was dragged along the Baltic seabed for over 100 miles.”
November 27 – Financial Times (Richard Milne): “China’s growing support for Russia is hurting Beijing’s relations with Europe, according to some Nordic and Baltic leaders, as they also urged the EU to urgently toughen its response to hybrid warfare such as sabotage of critical infrastructure. A Chinese vessel linked to the severing of two cables in the Baltic Sea is currently in international waters between Sweden and Denmark, the second time in 13 months that a ship from the country is suspected of causing damage to undersea infrastructure in the area… Petteri Orpo, the Finnish prime minister, said: ‘We have seen that behind Russia there is more and more China. I am concerned. I hope they have heard Europe’s message. It’s not good for relations between Europe and China if they increase their support to Russia to fight against Ukraine.’”
Inflation Watch:
November 26 – Associated Press (Alex Veiga): “The Federal Housing Finance Agency is increasing the size of home loans that the government can guarantee against default as it takes into account rising housing prices. Beginning next year, mortgage buyers Fannie Mae and Freddie Mac will be able to acquire loans of up to $806,500 on single-family homes in most of the country… The new conforming loan limit is a 5.2% increase from its 2024 level.”
November 25 – Bloomberg (Dayanne Sousa): “Coffee futures in New York climbed to the highest since 1997 on worries about crops in top growers, threatening to further raise costs for roasters and consumers. Arabica, the high-end variety favored for specialty brews, rose as much as 3% on Monday. Coffee prices have soared this year due to major supply disruptions in key producers from Brazil to Vietnam, with the more budget-friendly robusta type that’s used in instant drinks recently hitting the highest since the 1970s.”
Federal Reserve Watch:
November 26 – Reuters (Howard Schneider): “Federal Reserve officials appeared divided at their meeting earlier this month over how much farther they may need to cut interest rates, but as a group agreed to avoid giving much guidance from here on about how U.S. monetary policy is likely to evolve. There was uncertainty about the direction of the economy, Fed officials noted, according to the minutes of the Nov. 6-7 meeting, uncertainty about just how much the current level of interest rates was doing to restrict the economy – a key issue in deciding how much further rates should fall – and a developing case to step carefully. ‘Many participants observed that uncertainties concerning the level of the neutral rate of interest complicated the assessment of the degree of restrictiveness of monetary policy and, in their view, made it appropriate to reduce policy restraint gradually,’ said the minutes…”
November 25 – Reuters (Ann Saphir and Rhea Rose Abraham): “Federal Reserve Bank of Minneapolis President Neel Kashkari, typically on the hawkish end of the U.S. central bank’s policy spectrum, said… he is open to cutting interest rates again next month. ‘It’s still a reasonable consideration,’ Kashkari said… ‘Right now, knowing what I know today, still considering a 25-bps cut in December – it’s a reasonable debate for us to have.’”
November 26 – Bloomberg (Catarina Saraiva): “Federal Reserve Bank of Chicago President Austan Goolsbee said it would be ‘perfectly sensible’ for the US central bank to slow down the pace of its interest-rate cuts as it approaches what it deems a neutral setting for monetary policy. ‘The field guide version of figuring out what is neutral and what is restrictive involves looking around and seeing how conditions are behaving,’ Goolsbee said… ‘You can’t do that in a two-week time frame. It takes a little time, so slowing down probably makes sense in that kind of circumstance.’”
U.S. Economic Bubble Watch:
November 26 – Associated Press (Christopher Rugaber): “Americans’ outlook on the economy improved modestly in November, lifted by expectations for lower inflation and more hiring. The Conference Board… said… its consumer confidence index ticked up to 111.7 from 109.6 in October. The small increase followed a big gain in October. Rising consumer confidence suggests Americans may spend more in the coming months…”
November 27 – Associated Press (Cora Lewis): “More shoppers than ever are on track to use ‘buy now, pay later’ plans this holiday season… The data firm Adobe Analytics predicts shoppers will spend 11.4% more this holiday season using buy now, pay later than they did a year ago. The company forecasts shoppers will purchase $18.5 billion worth of goods using the third-party services for the period Nov. 1 to Dec. 31, with $993 million worth of purchases on Cyber Monday alone. Buy now, pay later can be particularly appealing to consumers who have low credit scores or no credit history, such as younger shoppers, because most of the companies providing the service run only soft credit checks and don’t report the loans and payment histories to the credit bureaus, unlike credit card companies.”
November 27 – Associated Press (Mae Anderson): “The number of Americans applying for unemployment benefits fell last week, remaining near seven-month lows. Jobless claim applications fell by 2,000 to 213,000 for the week of Nov. 23… The previous week’s level was revised up by 2,000 from 213,000, to 215,000. However, continuing claims, the total number of Americans collecting jobless benefits, rose by 9,000 to 1.91 million for the week of Nov. 16. That’s the highest number since Nov. 13, 2021.
November 27 – Reuters (Lucia Mutikani): “U.S. consumer spending increased slightly more than expected in October, suggesting the economy retained much of its solid growth momentum early in the fourth quarter, but progress on lowering inflation appears to have stalled in recent months… Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.4% last month after an upwardly revised 0.6% advance in September… Income rose 0.6%, boosted by a 0.5% gain in wages.”
November 27 – CNBC (Diana Olick): “Mortgage rates dropped last week, and homebuyers jumped off the fence. They drove total mortgage demand up 6.3% compared with the previous week… Applications for a mortgage to purchase a home increased 12% from the previous week…”
November 27 – Associated Press (Alex Veiga): “The average rate on a 30-year mortgage in the U.S. eased this week, though it remains near 7% after mostly rising in recent weeks. The rate slipped to 6.81% from 6.84% last week, mortgage buyer Freddie Mac said… That’s still down from a year ago, when the rate averaged 7.22%.”
November 26 – Yahoo Finance (Dani Romero): “Sales of new single-family homes plummeted in October to the lowest level in about two years as mortgage rates remained elevated during the month and hurricanes took a toll on housing activity. New home sales dropped 17.3% in October from the previous month to a seasonally adjusted rate of 610,000 units… Analysts… had expected a pace of 725,000. ‘New home sales were much weaker than expected in October, with Hurricanes Helene and Milton taking a much larger toll than anticipated on sales in the South,’ Nancy Vanden Houten, lead US economist at Oxford Economics, wrote… Sales in the South fell 28% to 339,000 in October, marking the slowest rate of increase since April 2020.”
November 27 – Reuters (Dan Burns): “Contracts to buy U.S. previously owned homes rose unexpectedly in October, notching a third straight month of increases, despite high mortgage rates and as inventory of properties for sale continued to build and a healthy job market fortifies the finances of prospective buyers. The… Pending Home Sales Index… rose 2.0% last month to 77.4 – the highest since March – from 75.9 in September. Economists… had forecast contracts… would fall 2.0% after increasing 7.5% in September, the largest increase in more than four years. Pending home sales rose 5.4% from a year earlier and all four regions saw month-over-month and year-over-year increases.”
November 27 – Bloomberg (Augusta Saraiva and Matthew Boesler): “The US economy expanded at a solid pace in the third quarter, largely powered by a broad-based advance in consumer spending and steady business investment. Gross domestic product increased at a 2.8% annualized pace in the third quarter, the second estimate of the figures from the Bureau of Economic Analysis showed Wednesday. The economy’s primary growth engine — consumer spending — advanced 3.5%, the most this year.”
November 26 – Bloomberg (Mitchell Ferman): “Oil and gas producers in the US will not raise output significantly in the coming years despite calls from President-Elect Donald Trump to ‘drill, baby, drill,’ said Exxon Mobil Corp.’s Upstream President Liam Mallon… ‘I think a radical change is unlikely because the vast majority, if not everybody, is primarily focused on the economics of what they’re doing,’ Mallon said… Exxon’s European rival TotalEnergies SE is also skeptical of Trump’s vow to open US taps. ‘Maybe he has a magic recipe to push them to drill like mad,’ TotalEnergies Chief Executive Officer Patrick Pouyanne said… He cited US producers’ commitment to return cash to shareholders and said ‘it’s not only decisions by politicians’ that drive American output.”
China Watch:
November 29 – Bloomberg: “China boosted its cash injection into the banking system via a recently launched policy tool, in a move designed to ensure sufficient liquidity amid a surge in local government bond sales. The People’s Bank of China conducted 800 billion yuan ($111bn) of outright reverse repurchase agreements in November…, exceeding the 500 billion yuan injected last month.”
November 25 – Bloomberg (Apple Ka Ying Li and Lorretta Chen): “China Vanke Co. is seeking lenders’ approval to change terms on two offshore loans, people familiar with the matter said, after its finances worsened amid a prolonged property crisis. Vanke has been asking to waive certain covenants on two facilities due near the end of 2026… The company has two five-year loans of HK$10.5 billion ($1.35bn) and HK$5.2 billion maturing December 2026… In general, waivers are sometimes sought when borrowers are at risk or breaching certain conditions in a debt agreement.”
November 28 – Bloomberg: “China has abruptly suspended Miao Hua from the nation’s apex military body led by President Xi Jinping, ramping up a graft probe that’s roiling the upper echelons of the People’s Liberation Army. The top official overseeing political loyalty in the armed forces is under investigation for ‘serious violations of discipline,’ Defense Ministry spokesman Wu Qian said…”
November 26 – Financial Times (Demetri Sevastopulo): “China has put its defence minister under investigation in the latest corruption-related scandal to hit the top of the People’s Liberation Army, according to current and former US officials familiar with the situation. Admiral Dong Jun, who was named in December 2023 after his predecessor was fired for corruption, is being investigated as part of a broader probe into graft in the PLA… He is the third consecutive serving or former defence minister to be investigated for alleged corruption. Dong succeeded General Li Shangfu, who was ousted after just seven months in the job. Both men were appointed by President Xi Jinping.”
November 26 – Reuters (David Kirton and James Pomfret): “Hundreds of Chinese investors who lost savings in the collapse of China Evergrande launched a coordinated campaign this month to press authorities for an update on the failed property developer… In the previously unreported action, small groups of disgruntled investors turned up at three Shenzhen government offices in succession to ask for an update on an investigation launched more than a year ago… They said they hoped this method of applying pressure on officials would not be deemed as a form of unlawful public protest.”
Central Bank Watch:
November 26 – Bloomberg (William Horobin): “France’s central bank governor, Francois Villeroy de Galhau, called for more certainty around plans to repair the country’s finances as the government struggles to get the budget through parliament. ‘Investors who lend to France and French people themselves, both households and companies, expect clarity and confidence on how we will reduce our deficits and control our public debt,’ he said…”
November 24 – Financial Times (Sam Fleming and Valentina Romei): “US monetary policy is on course to sharply diverge from Europe’s next year, with higher growth and inflation projections opening a transatlantic divide with the sluggish Eurozone. The Federal Reserve is set to cut its benchmark interest rate only half as much by the end of next year as the European Central Bank, which is facing sagging growth and inflation that undershoots its target… With Donald Trump preparing to cut taxes and increase tariffs, US inflation is forecast to stay above 2% throughout the whole of 2025, according to predictions compiled by Consensus Economics. Eurozone inflation is on the other hand forecast to drop below the ECB’s target of 2% as soon as February.”
Europe Watch:
November 27 – Reuters (Miranda Murray, Maria Martinez and Christian Kraemer): “German consumer sentiment looks set to tumble in the last month of the year as households, worried by reports of job cuts, grow more pessimistic about their income prospects, a survey showed… The consumer sentiment index, published by GfK and the Nuremberg Institute for Market Decisions (NIM), fell significantly more than expected going into December, to -23.3 points from a downwardly revised -18.4 points the month before… The December figure marks the lowest point for consumer sentiment since May…”
Japan Watch:
November 28 – Bloomberg (Toru Fujioka): “Tokyo inflation accelerated more than expected in November while other data showed the economy moving broadly in line with Bank of Japan projections, feeding into speculation over a possible December rate hike… Consumer prices excluding fresh food in the capital climbed 2.2% from a year earlier in November, picking up from 1.8% largely on a winding down of energy subsidies… Overall inflation sped up to 2.6%, as food prices also pushed up the gauge, also outpacing economist expectations.”
November 26 – Bloomberg (Toru Fujioka): “Japanese companies are passing on rising labor costs to business customers in the form of higher service prices at the fastest pace in 32 years, according to Bank of Japan data that support the case for raising the benchmark interest rate. Producer prices among services with a high labor cost ratio rose 3.3% in October from a year earlier…”
November 25 – Bloomberg (Nao Sano): “Paper losses on domestic bonds held by Japan’s four major life insurers have more than doubled from the fiscal year ended March as interest rates climbed, though the firms recouped some of the losses since June. Valuation losses on the debt totaled ¥4.429 trillion ($29bn) as of the end of September, from ¥2.051 trillion in March, data from the four insurers show…”
Emerging Markets Watch:
November 28 – Bloomberg (Giovanna Bellotti Azevedo and Leda Alvim): “The Brazilian real dropped to a record low and stocks slumped the most since early 2023 as a proposal to cut some $12 billion in public spending disappointed investors who have grown increasingly concerned about the country’s budget deficit. The currency fell as much as 1.5% on Thursday to 6.02 per dollar. Swap rates surged more than 40 points, and the country’s benchmark stock index dropped 2.4%.”
November 25 – Reuters (YP Rajesh and America Hernandez): “French oil major TotalEnergies halted… investments into Adani Group, after the Indian ports-to-power conglomerate was engulfed in a crisis over an alleged multi-million-dollar bribery scheme. The move is the first major fallout from U.S. authorities’ decision to charge Adani’s billionaire chairman Gautam Adani and seven other people with agreeing to pay around $265 million in bribes to Indian government officials.”
November 27 – Reuters (Gleb Bryanski and Alexander Marrow): “Russia’s central bank said on Wednesday it would stop foreign currency purchases in order to ease pressure on the financial markets after the rouble weakened beyond 110 to the U.S. dollar, down by one-third since early August. The central bank said it had decided not to buy foreign currency on the domestic market from Nov. 28 until the end of the year, but to defer these purchases until 2025. ‘The decision was made to reduce the volatility of financial markets,’ the regulator said… Since Russia was blocked from using the dollar and euro, it has made foreign exchange interventions using Chinese yuan.”
Geopolitical Watch:
November 27 – Reuters (Sabine Siebold): “Russia’s acts of sabotage against Western targets may eventually prompt NATO to consider invoking the alliance’s Article 5 mutual defence clause, the head of Germany’s foreign intelligence service said… Speaking at an event of the DGAP think tank in Berlin…, Bundesnachrichtendienst chief Bruno Kahl said he expected Moscow to further step up its hybrid warfare. ‘The extensive use of hybrid measures by Russia increases the risk that NATO will eventually consider invoking its Article 5 mutual defence clause,’ he noted.”
November 25 – Reuters (Sabine Siebold): “A top NATO military official… urged businesses to be prepared for a wartime scenario and adjust their production and distribution lines accordingly, in order to be less vulnerable to blackmail from countries such as Russia and China. ‘If we can make sure that all crucial services and goods can be delivered no matter what, then that is a key part of our deterrence,’ the chair of NATO’s military committee, Dutch Admiral Rob Bauer, said… Speaking at an event of the European Policy Centre think tank, he described deterrence as going far beyond military capability alone, since all available instruments could and would be used in war. ‘We’re seeing that with the growing number of sabotage acts, and Europe has seen that with energy supply,’ Bauer said.”
November 27 – Reuters (Erin Banco and Phil Stewart): “The U.S. decision to allow Ukraine to fire American weapons deeper into Russia has not increased the risk of a nuclear attack, which is unlikely, despite Russian President Vladimir Putin’s increasingly bellicose statements, five sources familiar with U.S. intelligence told Reuters. But Russia is likely to expand a campaign of sabotage against European targets to increase pressure on the West over its support for Kyiv, said two senior officials, a lawmaker and two congressional aides briefed on the matter.”More By This Author:Weekly Commentary: The Rave
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