Grab your popcorn…

With the ‘woke’ global left starting to crumble, as so well exclaimed by Argentina’s Milei earlier today, President Trump will speak remotely at the World Economic Forum in Davos, Switzerland, this morning, delivering his first major speech to global business and political leaders.

The world will be listening closely for any details on his pledge to introduce universal tariffs on goods imported to the U.S., and for his position on major geopolitical and economic issues such as the Ukraine-Russia war, the future of Israeli-Palestinian relations and America’s economic rivalry with China.

Trump has openly criticized the diversity, equity, and inclusion (DEI) and environmental, social, and governance (ESG) initiatives championed by the WEF.

During his first term, Trump traveled to Davos twice, in 2018 and 2020, to attend the WEF meetings.

In his keynote address in 2020, he touted his protectionist trade policies and the United States’ position as the world’s largest oil and gas producer.

He also expressed concerns about NATO’s heavy dependence on the United States, urging member nations to increase their contributions to defense spending.

In recent years, however, the forum has increasingly faced criticism, with questions raised regarding the usefulness of its debates in resolving the struggles of regular people.

Watch Trump’s speech here (due to start at 1100ET):

Update (0840ET): The Trump administration initiated plans yesterday for the Pentagon to mobilize 1,500 active-duty troops to the US-Mexico border, joining the 2,500 National Guard and Reserve forces already in place.

New reports show Trump could soon order the Pentagon to mobilize upwards of 10,000 troops to “seal the borders” and thwart “unlawful mass migration.”

The number of 10,000 troops comes from a US Customs and Border Protection briefing document obtained by The Washington Post. 

Here’s more from WaPo:

President Donald Trump is preparing to send around 10,000 troops to the southern border, where they will support Border Patrol agents under new orders to shut off access to asylum, according to a US Customs and Border Protection briefing document obtained by The Washington Post.

The order directs border agents to block entry to migrants on the grounds that they have passed through countries where communicable diseases are present, without citing any specific health threat.

Acting Defense Secretary Robert Salesses stated in a DoD press release:

This is just the beginning. In short order, the Department will develop and execute additional missions in cooperation with DHS, federal agencies, and state partners to address the full range of threats outlined by the President at our nation’s borders.

President Trump directed action from the Department of Defense on securing our nation’s borders and made clear he expects immediate results. That is exactly what our military is doing under his leadership.

The lightning speed to secure the borders and restore national security after four years of disastrous globalist open border policies from the Biden-Harris regime is the new administration carrying out a campaign promise for the majority of voters. 

BREAKING: The 1,500 military troops President Trump deployed to the border have arrived, and senior administration officials say “this is just the start.”

The soldiers are reinforcing walls and building outposts to help them monitor any illegal entries.

We are finally using our… pic.twitter.com/B1qr40gkM2

— George (@BehizyTweets) January 23, 2025

Meanwhile, Border Czar Tom Homan confirmed earlier this week that large-scale raids targeting criminal illegal aliens were already underway. 

BREAKING: Tom Homan confirms ICE teams have started illegal immigration raids.

Law and order is back. pic.twitter.com/HHOUpejUku

— Charlie Kirk (@charliekirk11) January 21, 2025

Taxpayers want a safe homeland and an end to far-left globalist policies. 

*   *   *  

President Donald Trump’s extraordinary move to restore national security began on Monday with a series of executive orders on immigration. By Tuesday, Border Czar Tom Homan confirmed that large-scale raids targeting criminal illegal aliens were underway. Now, the Pentagon is reportedly preparing to deploy more than a thousand active-duty troops to secure the southern border in the coming days, following four years of a wide-open border facilitated by globalist Democrats in the Biden-Harris regime.

AP News, in typical fashion, citing anonymous US officials, reported that Acting Defense Secretary Robert Salesses is preparing to sign a deployment order for 1,500 active-duty troops. These troops would support border agents by assisting with logistics, transportation, and the construction of barriers. 

“Troops are prohibited by law from doing law enforcement duties, but that may change,” AP’s Pentagon reporter Tara Copp noted. 

However, she said, “Trump has directed through executive order that the incoming secretary of defense and incoming homeland security chief report back within 90 days if they think an 1807 law called the Insurrection Act should be invoked. That would allow those troops to be used in civilian law enforcement on US soil.” 

Active duty forces could begin deployment to the southern border by the end of the week. There are currently no active-duty troops there. The latest figures show about 2,500 National Guard and Reserve members are positioned along the southern border. 

On Monday, Trump told the American people during his inaugural address, “I will declare a national emergency at our southern border. All illegal entry will immediately be halted, and we will begin the process of returning millions and millions of criminal aliens back to the places in which they came.”

The move to secure the border and protect the American people from the illegal alien invasion facilitated by open-border globalist Democrats has been widely expected. 

Here’s a recap of Trump’s executive orders on immigration (courtesy of NBC News):

• End birthright citizenship for future children born to mothers who are in the United States unlawfully or temporarily unless the child’s father is here legally and permanently

• Direct federal agencies to identify countries that do not provide sufficient information on their nationals and to bar those nationals from entry to the US.

• Send the military to the border by declaring a national emergency

• Halt all refugee admissions into the United States until policy “aligns” with US interests

• Designate cartels and migrant gangs MS-13 and Tren de Aragua as foreign terrorist organizations

• Restrict federal funds from sanctuary cities and potentially take legal action against them

• Require immigrants unlawfully in the United States to register and be fingerprinted

• End the CBP One program and the parole program for Cubans, Haitians, Nicaraguans and Venezuelans

• Deny public benefits to unauthorized immigrants

• Reinstate the “Remain in Mexico” policy

During Trump’s first term, more than 7,000 active-duty troops were stationed across the border in Texas, Arizona, and California. If the AP story is correct about the first tranche of 1,500 troops preparing for deployment, then there is the possibility that those numbers will be ramped up in the coming weeks, if not months.  

The American people gave Trump a mandate: Restore national security. 

Far-left Democrats are losing their minds on Trump’s massive immigration shift. With leftists corporate media primarily fixated on huge deportation costs.

So we ask these pro-open border folks: What price do you put on national security?

This illegal alien invasion had consequences: American lives were lost.

Every politician that defends open borders, sanctuary cities, and oppose deporting illegal aliens from Joe Biden on down are responsible for Laken Riley’s death.

Rest in Peace Laken. Our government let you down. pic.twitter.com/FZISS96eoA

— Ryan James Girdusky (@RyanGirdusky) February 24, 2024

Once the southern and northern borders are secured, the American people must hold accountable the politicians, non-profits, federal agencies, staffing companies, corporations, and others involved in facilitating the migration invasion that has undermined national security. The most effective way to ensure accountability is at the ballot box in the next election cycle. 

After exploding to its highest since Jan 2022, unadjusted jobless claims crashed lower last week while ‘seasonally-adjusted’ initial jobless claims rose to 223k (its highest since the first week of December)…

Source: Bloomberg

Continuing jobless claims jumped higher to 1.899 million Americans, just shy of its highest since Nov 2021…

Source: Bloomberg

Certainly nothing new here and nothing that warrants a rate-cut next week.

Authored by Michael Every via Rabobank,

Get over it, but you can’t get past it

Jamie Dimon of JP Morgan Chase –in Davos(!)– yesterday stated US tariffs are an economic tool or an economic weapon and, “I would put in perspective: If it’s a little inflationary, but it’s good for national security, so be it. I mean, get over it.”

Exactly so. Our ‘grand macro strategy’ report on economic statecraft published after President Trump won re-election stressed that for political realists, not economic idealists, tariffs are always about national security, raising national savings and key related investments, and foreign policy goals; and both Trump’s and US history said we would be seeing a lot more of them.

As Bloomberg puts it, the current state of play is that Trump could potentially introduce sweeping changes to US and global trade policy, giving him a “loaded weapon” –of tariffs T+1– as leverage for national security goals and new capital investment into the US. Or foreign policy goals.

Indeed, following the threat of a 1 February imposition of 25% tariffs on Mexico and Canada, and an additional 10% on China, all for national security reasons, President Trump has stated if Russian President Putin doesn’t accept a peace deal to end the Ukraine War, the US will impose tough sanctions, taxes, and tariffs on Russia’s energy sector which, by implication, might even extend to those buying from Russia or working with it: that could cover the EU (which, ridiculously from a statecraft perspective, still relies on Russian LNG); India; and China.

Our back of an envelope projection is that cutting off Russian LNG from Europe could raise TTF gas prices to €70-80/MWh.

Few in Europe would be saying, “Get over it,” and Europe’s key problem is that it can’t get over its structural geostrategic weakness. Cutting off Russian oil would see prices temporarily spike to $90-95 a barrel before OPEC picked up production to normalise things.

Yet as the economic statecraft report also stressed, in realpolitik things aren’t static.

If President Trump escalates to economic warfare to force President Putin to end physical warfare, Russia (and China, if its third-party neutral trading rights –also detailed in the report– are penalised) can respond with their own economic statecraft, or the other two legs of grand strategy alongside it: political and military statecraft, to up the ante. That’s as the Financial Times says China is shipping sodium perchlorate to Iran to fuel ballistic missiles, which will see some in the US go ballistic; and a report claims two undersea cables connecting Taiwan to its outlying island of Matsu were mysteriously cut yesterday – something that seems to be happening a lot recently, and only on one side of the geopolitical fault-line.

For markets, given Trump and Putin both famously like to escalate to deescalate, and others can easily be dragged into this vortex, volatility remains the watchword. 

That’s hard going to get past even if you get over the shock of tariffs being accepted by Jamie Dimon.

Indeed, as politics moves at dizzying speed within the US, prompting the Wall Street Journal to note that ‘CEOs Launch War Rooms, Hotlines to Cope With Trump’s Order Blitz’, in geopolitics, the same is true – just with real War Rooms.

• Bloomberg reports that, ‘One by One, World Leaders in Davos Fall in Line in Trump Era’, though I can think of a few who don’t and won’t.

• President Zelenskyy says even if a Ukraine peace deal is signed, it would require 200,00 EU troops in the country to prove sustainable. That’s almost the entire French armed forces. If true, somebody in Europe is going to be spending a vast amount on defence in the next few years. After all, ‘Freedom isn’t free’ – or just free trade.  

• Saudi Arabia’s MBS reportedly offered the US at least $600bn in new trade and investments over the next four years. Some may say Saudi doesn’t have that kind of cash with oil prices at current levels, let alone the lower ones Trump wants to see… then again, neither does the Big Tech group behind the $500bn AI ‘Project Stargate’ announced yesterday, says Elon Musk.

• The US relisted Yemen’s Houthis as a terrorist organisation, ironically as the latter allows all but Israeli ships to transit Suez again while the current Middle East ceasefire holds – which many there expect is unlikely to last that long.

• Argentina’s President Milei is prepared to quit the Mercosur trade bloc to get a US FTA. Europe only just introduced an FTA with Mercosur is already losing out.

• The UK press argues PM Starmer must “fight hard and fast to define Britain’s destiny” and needs “a coherent strategic purpose.” So, grand strategy –where the key choice is does the UK go with the US or the EU?– not a piecemeal technocratic Grand Starmer-gy.

• France’s trade minister suggested the EU should try to diversify trade to Latin America (more than the FTA with Mercosur minus Argentina?) and ASEAN (which mainly consists of net exporters whom the US can provide security guarantees to which the EU cannot).  

• The Pentagon is sending troops to the US-Mexico border to boost security and airlift out migrants, as Mexico reportedly sets up a tent city to prepare for mass deportations from the US.

• Secretary of State Rubio’s first official visit will be to the Panama Canal, a break from the precedent of going to key allies first. He also attacked China for its actions vis-à-vis the Philippines and promised the latter an “iron clad” US defence as well as expanded security and economic ties.

Day ahead

Today has the ECB’s Escriva, Canadian retail sales, and US weekly jobless claims, then Eurozone consumer confidence.

US equity futures are slightly lower as markets look to take a  breather after making a new intraday all-time high in the US and Europe on Wednesday. As of 7:30am, S&P futures dipped 0.1% after the index closed on the brink of record peak, propelled by optimism over – what else – artificial intelligence, and a solid batch of earnings from corporate heavyweights. Nasdaq 100 futures fell 0.5% with all Mag7 names lower ex-META and Semis also weaker with NVDA/AVGO lower. Bond yields are higher, with the 10Y rising 2bps to session highs at 4.64% the highest since Jan 16, while the USD also rose. The commodity complex is under pressure with the exception of energy as WTI trades near session highs around $79.4. Today’s macro data focus is on jobless data and regional activity indicators ahead of tomorrow’s Flash PMIs.

In premarket trading, Electronic Arts shares plunge 15% after the video-game company cut its full-year net bookings guidance to a range that’s below analyst expectations, with EA Sports FC 25 and Dragon Age: The Veilguard both underwhelming. Several analysts downgraded the stock. Semiconductor stocks drop as Korean memory chipmaker SK Hynix’s record quarterly results failed to impress investors. Potential US export controls have also weighed on the sector in recent days (Nvidia (NVDA US) -1.9%, Micron Technology (MU US) -3.7%, Arm (ARM US) -4.4%, Applied Materials (AMAT US) -1.3%, Lam Research (LRCX US) -1.4%). Mag 7 stocks also dropped (Apple -0.3%, Nvidia -1.9%, Microsoft -0.8%, Alphabet -0.2%, Amazon -0.5%, Meta Platforms +0.6% and Tesla -0.5% in premarket trading). Here are some other notable premarket movers:

• Alaska Air (ALK US) shares rise 4.3% as the carrier forecast a smaller-than-expected loss in the first quarter. The company joins larger rivals United Air as airlines capitalize on unusually strong demand for travel.
• AST Spacemobile (ASTS US) shares drop 13% after announcing the pricing of $400 million aggregate principal amount of convertible senior notes due 2032 in a private offering.
• Boston Beer (SAM US) shares trade 1.1% lower after Piper Sandler downgraded the stock to neutral from overweight, overweight, citing slower-than-expected sales growth of its Twisted Tea product.
• Plexus Corp. (PLXS US) shares fall 11% after the electronics manufacturing services company forecast revenue for the second quarter below the average analyst estimate.
• RLI Corp. (RLI US) shares decline 5.9% after the specialty insurance company posted 4Q net premiums written that fell short of expectations.
• Veeva (VEEV US) shares slide 4.7% after a double downgrade to sell from buy at Goldman Sachs.
• Vertical Aerospace (EVTL US) shares tumble 30% after the aerospace company announced that it has commenced an underwritten public offering of $75 million of units.

Markets started the year in an upbeat mood amid relief that Trump has so far held off on imposing tariffs on trade partners in his first few days in office, despite threatening levies on China, Mexico, Europe and China. That said, the rally that took stocks to new all time highs on the back of AI stocks amid collapsing breadth, showed some signs of flagging as investors took stock of President Trump’s first few days in office. While his move to boost AI spending buoyed tech megacaps on Wednesday, the risk of tariffs on major trading partners still weighs on sentiment. The S&P 500 index has climbed about 5% since Trump’s election victory on Nov. 6.

“We continue to expect near-term volatility as markets react to incoming Trump headlines, and see negative impact on targeted regions if the administration follows through with the proposed tariffs,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “But we also believe US equities have room to grind higher as growth momentum continues.”

Focus on Thursday will next turn to US jobless-claims data, as well as Trump’s address at the World Economic Forum in Davos and fourth-quarter earnings reports from companies including General Electric Co., American Airlines Group Inc. and Texas Instruments Inc.

Still, there are signs the rally could be overheating with valuations at sky-high levels, especially those of tech behemoths.
“There’s a loss of momentum,” said Paul Jackson, global head of asset allocation research at Invesco, “There’s a lot of hope, a lot of good news already priced in the US markets.”

The Stoxx Europe 600 index was little changed after coming within a hair’s breadth of an all-time high on Wednesday. Technology shares fell more than 1%, giving up most of the previous day’s advance as they underperformed every other industry group in the index. Puma plunged after reporting disappointing figures, while Sweden’s EQT and Swedbank both jumped on their respective earnings. Here are the biggest movers Thursday:

• EQT gains as much as 7.9% after the Swedish private equity firm posted a reassuring set of fourth-quarter figures. Analysts described it as the best value-creating reporting period in three years
• Spectris shares jump as much as 15%, the biggest gain since 2009, after the high-tech instrument maker said its 2024 profit will top consensus. Investors should welcome the update, Jefferies says
• Swedbank shares gain as much as 5.7%, the most since October, after the Swedish lender surprised the market with a higher dividend than expected, with analyst also noting net interest income beat
• Ashtead Technology gains as much as 9.4%, hitting their highest level since late October, after the subsea equipment rental firm said it expects annual adjusted Ebita in 2024 to be ahead of consensus
• ProSieben shares climb as much as 6.3% as JPMorgan raises its estimate for the broadcaster’s 2025 Ebitda, citing a better-than-expected start to 2025
• Logitech shares rise as much as 4.2% in Zurich to the highest since July after Morgan Stanley upgraded its rating to equal-weight from underweight, saying recent data suggests potential upside to shares
• Team17 shares rise as much as 13%, hitting their highest level in over three months, after the video game firm said its 2024 results will be ahead of expectations
• Puma shares fall as much as 19%, the steepest intraday drop since September 2001, after the sportswear maker’s preliminary net income for the fourth quarter missed estimates
• Inchcape drops as much as 11%, the most since March, as JPMorgan cuts the vehicle dealership group to neutral from overweight and puts the stock on negative catalyst Watch ahead of results on March 4
• ASML falls as much as 4.5%. The decline comes amid a broader retreat in chip-equipment stocks, as well as Dutch comments on potential US export controls and Korean chipmaker SK Hynix’s stance on capex
• Hochschild Mining shares drop as much as 6.3%, extending losses following the slump seen Wednesday when the miner’s update triggered concerns about the impact of rising costs on its earnings
• Tryg falls as much as 6.6% after the Danish insurance group’s 4Q figures missed expectations. Analysts say while the result will briefly disappoint, it does not impact the longer-term investment case
• Galapagos drops as much as 3.6% after Barclays cut its rating on the stock to underweight from equal-weight, saying any value creation from a planned spinoff will “take a long time to play out”

Asian stocks were mixed, with Chinese shares edging higher after a government push for long-term funds to raise holdings in the market. Korea led regional losses, weighed down by SK Hynix’s stock after it reported earnings. The MSCI Asia Pacific Index pared advances of as much as 0.4% to trade little changed. Japanese firms including SoftBank Group and Mitsubishi Heavy Industries were among the biggest contributors to the gauge’s climb. Japanese stocks rose for a fourth day, tailing gains posted by US technology companies, which are expected to lead large-scale investments in artificial intelligence. The Bank of Japan is widely expected to raise its benchmark rate Friday by the most in 18 years. Chinese equities received a boost after authorities said they are guiding local mutual funds and insurers to raise investments into stocks in latest efforts to shore up its ailing market. The onshore benchmark CSI 300 Index rose as much as 1.8%, before ending the day 0.2% higher.

In FX, the Bloomberg Dollar Spot Index is steady. The yen inches higher with some help from a Nikkei report that said the Bank of Japan are set to raise rates on Friday. The Norwegian krone falls 0.2% after the Norges Bank left interest rates on hold as expected and stuck with its guidance for a reduction in March.

In rates, treasuries dip, with 10-year yields up 2bps to 4.64%, and slightly cheaper vs bunds and gilts. Front-end outperformance steepens 2s10s spread by around 2bp to 33bp, near weekly high. Bunds and gilts also edge lower with little economic data in Europe to dictate otherwise.

In commodities, oil prices are higher, with WTI around $75.40 a barrel. Spot gold falls $7 to ~$2,749/oz. Bitcoin falls 2% to below $102,000.

The US economic data calendar includes weekly jobless claims (8:30am) and January Kansas City Fed manufacturing activity (11am).

Market Snapshot

• S&P 500 futures down 0.2% to 6,105.50
• MXAP little changed at 181.48
• MXAPJ down 0.3% to 570.12
• Nikkei up 0.8% to 39,958.87
• Topix up 0.5% to 2,751.74
• Hang Seng Index down 0.4% to 19,700.56
• Shanghai Composite up 0.5% to 3,230.16
• Sensex up 0.2% to 76,568.99
• Australia S&P/ASX 200 down 0.6% to 8,378.71
• Kospi down 1.2% to 2,515.49
• STOXX Europe 600 down 0.1% to 527.37
• German 10Y yield little changed at 2.53%
• Euro little changed at $1.0405
• Brent Futures little changed at $79.05/bbl
• Brent Futures up 0.1% to $79.08/bbl
• Gold spot down 0.5% to $2,742.87
• US Dollar Index up 0.13% to 108.31

Top Overnight News

• Trump set to tap health industry lobbyist Don Dempsey for top white house budget job. This appointment would deal a blow to Robert F. Kennedy Jr’s hopes of overhauling the sector: FT
• Trump said he doesn’t care if Congress does one bill or two bills for reconciliation, while he stated regarding FEMA that he would rather see states take care of their own problems during a pre-recorded interview on Fox News.
• Trump announced Andrew F. Puzder will serve as the next US Ambassador to the EU.
• US Senate Committee will hold a confirmation hearing on January 29th for President Trump’s Secretary of Commerce nominee Howard Lutnick.
• Saudi Crown Prince MBS spoke with US President Trump on the phone and said the kingdom seeks to increase its investments and trade with the US by at least USD 600bln in the next four years, while the Saudi Crown Prince said the expected reforms under Trump’s administration could create “unprecedented economic prosperity”: FT
• China orders state-owned mutual funds and insurers to bolster domestic equity markets following poor YTD price action. China’s central bank chimed in with some support for the stock market too, saying at the press conference that it will continue to lower requirements for companies to get loans for stock buybacks. WSJ
• A record number of US companies in China are thinking about moving some operations out of the country or are already in the process of doing so, as geopolitical tensions rise with Trump’s return to the White House. FT
• South Korea’s GDP grew 0.1% in the fourth quarter from the previous three months, missing estimates. Japan’s exports rose for a third month in December. Singapore’s inflation unexpectedly held at 1.6%. BBG
• Asia hedge funds rebounded last year, keeping pace with the global average, after three years of widespread losses. Aspex, Panview and CloudAlpha were among those returning more than 35% on tech and AI bets. BBG
• Russia’s Kremlin on US President Trump threat of sanctions and tariffs on Russia, says “we do not see any particularly new elements here”; “we remain ready for equal and mutually respectful dialogue”.
• President Vladimir Putin has grown increasingly concerned about distortions in Russia’s wartime economy, just as Donald Trump pushes for an end to the Ukraine conflict. With domestic activity becoming strained in recent months by labor shortages and high interest rates introduced to tackle inflation, a negotiated settlement to the war is becoming increasingly desirable for Russia. RTRS
• SK Hynix shares slumped ~2.6% in South Korea after earnings (and it’s weighing on Eurozone chip stocks) as mgmt. spoke cautiously about demand in various non-AI end markets (PCs, smartphones, etc.) and acknowledged pockets of excess inventory while tempering expectations for capex growth this year (capital spending will rise only modestly this year). RTRS
• US crude inventories rose by 1 million barrels last week, the API is said to have reported. That’d be the first increase in nine weeks if confirmed by the EIA today. Fuel stockpiles also climbed. BBG
• Congress is considering a large bipartisan bill that would address the debt ceiling, the 3/14 budget expiration deadline, LA wildfire aid, and money for border security. Politico

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded somewhat mixed albeit with a mostly positive bias after the gains on Wall St where the S&P 500 printed a fresh record high and the Nasdaq led amid strength in tech and communications, while outperformance was seen in mainland China after Beijing announced efforts to support the stock market in a capital markets briefing. ASX 200 was pressured by underperformance in miners following several quarterly production updates, with tech and telecoms the only sectors that showed some resilience. Nikkei 225 climbed above the 40,000 level following recent yen weakness and mostly better-than-expected trade data. Hang Seng and Shanghai Comp were both initially underpinned with brokerage stocks lifted after the capital markets briefing in Beijing where officials from the CSRC, financial regulator and PBoC announced efforts to boost stocks with China to direct medium and long-term funds towards market investment, while there will be at least hundreds of billions of yuan of new long-term capital for A-shares every year from state-owned insurance companies. However, the Hong Kong benchmark eventually gave back the gains.

Top Asian News

• BoJ is poised to vote for a rate hike at tomorrow’s meeting, according to Nikkei sources. The BOJ has so far viewed the economic and market conditions following Trump’s inauguration as being relatively calm. The bank considered forgoing any hike if the inauguration resulted in a rollercoaster market ride, but several officials believe that “the situation is such that the bank can raise interest rates as expected.”
• A record number of US companies are considering moving some of their operations out of China or are in the process of doing so, according to a study cited by the FT.
• ByteDance earmarks over CNY 150bln in Capex for 2025 mostly targeting AI; NVIDIA (NVDA) and Huawei expected to benefit from ByteDance spending, according to Reuters sources
• China’s Vice Premier says China stands ready to increase understanding and mutual trust with the Netherlands.
• Nissan (7201 JT) is reportedly to procure EV batteries from SK’s (034730 KS) SK ON for the US market, via Nikkei; agreed to supply 20GWh worth of batteries.
• China’s MOFCOM, on US President Trump’s tariff threats, says tariffs are not good for China, US, and the world; China willing to work with US to promote stable, healthy development of economic and trade ties.
• China CSRC chief said China will direct medium and long-term funds towards market investment and there will be at least hundreds of billions of yuan of new long-term capital for A-shares every year from state-owned insurance companies, while a pilot scheme of insurers buying stocks is to be implemented in H1 2025 with scales of at least CNY 100bln. Furthermore, public funds are to increase A-share holdings by at least 10% annually over the next 3 years and China will guide fund companies to buy their own equity funds using some of their profits.
• China’s financial regulator vice head said they will encourage major state insurers to use 30% of their newly generated premium incomes for stock investment, while a PBoC official said they will expand the scope and increase the scale of liquidity tools to fund share purchases at the proper time.

European bourses (Stoxx 600 -0.1%) began the session mixed, continuing the indecisive mood seen in APAC trade overnight. Price action has generally moved sideways throughout the morning, given the lack of EZ-specific updates.  European sectors are mixed, and aside from the day’s clear underperformer (Tech), the breadth of the market is fairly narrow. Tech underperforms following SK Hynix results; the co. reported strong Q4 figures, but highlighted concerns regarding demand declines in commodity memory chips. Banks top the pile, joined closely by Utilities and Telecoms.

Top European News

• ECB’s Escriva says the ECB still has restrictive policy; need to be moving towards a neutral stance
• French Finance Minister Lombard says the 2024 deficit is seen coming in close to 6% of GDP.
• EU’s Sefcovic says a pan-European customs area is something the bloc would consider as part of a “reset” discussion with the UK; BBC’s understanding is that the gov’t has begun consultations on joining the Pan-Euro-Mediterranean Convention.
• Norges Bank holds rates at 4.50% as expected; Reiterates “The policy rate will likely be reduced in March”.
• The EU is to push AI, advanced research and clean tech in a bid to compete with the US, according to Bloomberg

FX

• DXY is flat with price action in the FX space contained amid quiet newsflow. Today’s data highlight comes via weekly claims data (covers the NFP survey week). DXY currently sits in a narrow 108.16-43 range. Focus will also be on US President Trump, who is set to appear in Davos at 16:00 GMT / 11:00 EST.
• EUR is flat vs the Dollar with EZ-macro drivers light other than an ongoing drip feed of rhetoric from various ECB speakers who have added little to the debate on the GC given that a 25bps cut next week is so nailed on. EUR/USD is back below its 50DMA at 1.0437 but maintaining a footing above the 1.04 mark after delving as low as 1.0391 in early trade.
• JPY is flat vs. the USD as mostly better-than-expected Japanese trade data did little to spur a reaction in the currency. Greater attention lies on Friday’s BoJ policy announcement and Governor Ueda press conference. Policymakers are set to pull the trigger on a 25bps hike with such an outcome priced at around 95% following a slew of recent source reports suggesting that this is the case. USD/JPY is currently contained on a 156 handle within a 156.21-75 range.
• GBP is trivially softer vs. the USD and EUR with fresh macro drivers for the UK on the light side asides from messaging out of the UK government which is attempting to kickstart its growth agenda. Greater attention lies on tomorrow’s PMI metrics. Cable is currently pivoting around the 1.23 mark.
• Antipodeans are both marginally softer vs. the USD and towards the bottom of the G10 leaderboard with downside coinciding with a downward drift in European equities.
• EUR/NOK was choppy after the Norges Bank kept its Key Policy Rate at 4.50% (as expected) and reiterated that the “the policy rate will likely be reduced in March”; the pair slipped to lows of 11.7269 from pre-announcement levels of around 11.74. CapEco thinks the path of inflation will allow the Bank to move “a bit more quickly”, cutting by 25bps once per quarter until the policy rate reaches 3% in the middle of 2026.
• PBoC set USD/CNY mid-point at 7.1708 vs exp. 7.2826 (prev. 7.1696).

Fixed Income

• USTs are modestly lower, in-fitting with peers; Potentially another relatively quiet session in terms of non-supply fixed drivers, with impetus potentially from weekly claims and then a virtual appearance by US President Trump in Davos at 16:00 GMT / 11:00 EST. USTs are modestly lower but also find themselves in a narrow 108-11+ to 108-19+ band. A brief bounce in EGB’s following strong French/UK auctions were not seen in USTs, hence still reside at lows.
• Bunds hold a slight bearish bias, arising despite the pressure seen in equities. Downside which is relatively minimal in nature and as such is potentially not worth reading into significantly with no clear or overt driver behind it in recent trade and as it continues the bearish-trend WTD as we continue to await a significant tariff update from Trump who is scheduled at 16:00GMT. Bunds bounced off a 131.70 trough following a strong French/UK auction, but the pressure returned soon after to make a fresh session low at 131.57.
• OATs underperformed into their supply which likely saw a record amount offered for and bid on the exclusively shorter-dated tap. An outing which was very strong across the board and as such OATs have picked up by around 20 ticks from the 122.48 session low following the bidding deadline passing. However, the benchmark remains in the red.
• Gilts are also in the red. UK specifics light aside from some incremental updates around potential closer trade ties with the EU, though nothing concrete/significant has emerged on this yet. A strong UK 2028 auction, saw the b/c top 3x, and helped to boost Gilts by around 10 ticks from the bottom-end of a 91.74-92.05 band – though in-fitting with peers, pressure returned to take Gilts back to a fresh low of 91.67.
• UK sells GBP 4.25bln 4.375% 2028 Gilt Auction: b/c 3.2x (prev. 3.12x), average yield 4.384% (prev. 4.499%) & tail 0.2bps (prev. 1.0bps).
• France sells EUR 13bln vs exp. EUR 11-13bln 2.50% 2027, 5.50% 2029, 2.75% 2030 OAT auction.

Commodities

• Crude futures trade with a modest upward tilt in the absence of major newsflow during the European morning and after settling marginally lower yesterday following a choppy session. Brent Mar in a USD 78.60-79.31/bbl parameter.
• Precious metals are mostly softer as the dollar remains resilient but with broader newsflow light in the European morning thus far. Spot gold traded rangebound overnight and took a breather after recently advancing to its highest level in almost three months, currently in a USD 2,740.86-2,756.59/oz range.
• Base metals are lower across the board amid the tentative risk mood and with Trump’s Chinese tariffs threats remaining a grey cloud over demand in the complex.
• Private inventory data (bbls): Crude +1.0mln (exp. -1.2mln), Distillate +1.9mln (exp. -0.0mln), Gasoline +3.2mln (exp. +2.3mln), Cushing +0.5mln.
• MMG (1208 HK) says Las Bambas copper production expected between 360k-400k tonnes in 2025; delivered copper production 15% higher in 2024; Zinc copper production in 2024 is 8% higher than 2023.
• EU reportedly plans to extend gas storage refill targets (main target of 90% full storage by Nov) ahead of winter for another year (set to expire Dec 2025), according to EU diplomats cited by Reuters.

Geopolitics: Middle East

• “Heavy Israeli tank fire on city centre Rafah Southern Gaza Strip”, according to Al Jazeera.
• US Secretary of State Rubio spoke to Israeli PM Netanyahu and conveyed that he looks forward to addressing threats posed by Iran.
• White House designated Yemen’s Houthi movement as a foreign terrorist organisation and said the policy of the US is to cooperate with regional partners to eliminate Houthis’ capabilities and operations.

Geopolitics: Ukraine

• “A senior European source told me this week yes, Russia has significantly escalated sabotage and it poses a real threat. But there’s a danger of adding 2 + 2 and getting five, concluding that Russia is deliberately behind everything”, via to WSJ’s Norman.
• Military administration in Zaporizhia reported 4 explosions in the city of Zaporizhia in southeastern Ukraine due to Russian missile shelling, according to Al Jazeera.

Geopolitics: Other

• US Secretary of State Rubio spoke to Venezuela’s Edmundo González Urrutia and María Corina Machado on Wednesday, while he reaffirmed US support for the restoration of democracy in Venezuela and the immediate release of all political prisoners. Rubio also spoke with South Korean Foreign Minister Cho held a phone call and stated that the US-South Korea alliance is the linchpin of regional peace and security. Furthermore, he spoke to the Philippines Secretary of Foreign Affairs about China’s dangerous and destabilising actions in the South China Sea.

US Event Calendar

• 08:30: Jan. Continuing Claims, est. 1.87m, prior 1.86m
• 08:30: Jan. Initial Jobless Claims, est. 220,000, prior 217,000
• 11:00: Jan. Kansas City Fed Manf. Activity, est. 0, prior -4

DB’s Jim Reid concludes the overnight wrap

Markets continued to advance over the last 24 hours, with the S&P 500 (+0.61%) closing just -0.06% beneath its all-time high in early December. That was driven by another batch of strong earnings results, which led to growing optimism about the economic outlook over the next couple of years. In fact, the latest gains mean the S&P 500 is now up +3.48% in 2025 already, making this the strongest start to a year since before the pandemic in 2019, when the S&P was up by +5.03% at this point. Over in Europe it was a similar story, with the STOXX 600 closing just a whisker beneath its own record high from late-September.

Tech stocks were driving those gains yesterday, with Netflix (+9.69%) posting the largest advance in the S&P 500 after announcing the biggest quarterly subscriber gain in their history. Otherwise, Procter & Gamble (+1.87%) also had a strong day, as their quarterly sales beat expectations for the first time in over a year. And the Magnificent 7 (+1.32%) outperformed as well, led by Nvidia (+4.43%). That came amid broad gains for AI-related stocks, with Oracle (+6.75%) and OpenAI’s partner Microsoft (+4.13%) advancing after unveiling the AI investment partnership with President Trump the previous evening. However, unlike recent days, the rally didn’t have much breadth to it, with nearly two-thirds of the S&P 500 lower on the day and the equal-weighted version (-0.37%) ending a run of 6 consecutive gains. So even as the overall index almost hit a new record, it was a narrow rally led by tech stocks, of the sort we’ve been used to over 2023 and 2024.

We’ll hear a lot more on the earnings front next week, including from Apple, Microsoft, Amazon, Meta and Tesla. But in the meantime, investors are still heavily focused on the new Trump administration and how it’s going to pursue the implementation of tariffs. In terms of the last 24 hours, Trump did make a post on Truth Social about Russia, saying that if a deal weren’t made to settle the war, he would “have no other choice but to put high levels of Taxes, Tariffs, and Sanctions on anything being sold by Russia to the United States, and various other participating countries.” The comments confirm suggestions that the new administration might take tougher sanctions measures against Russia, even if they might be less willing to provide more military aid to Ukraine. Otherwise, there weren’t any fresh developments on tariffs yesterday, so the focus now turns to the February 1 tariff deadline that Trump suggested earlier this week.

Given the risk-on tone for markets, US Treasury yields also moved higher yesterday, with the 10yr yield up +3.5bps to 4.61%. In part, that was because of some growing doubts about whether the Fed would still cut rates by much (if at all) this year, particularly with the S&P 500 nearing new highs and financial conditions easing over recent weeks. But overall, it wasn’t a particularly big move, and the focus is increasingly turning to the Fed’s decision next week, and how Chair Powell is set to describe the outlook.

Meanwhile in Europe, the STOXX 600 (+0.39%) posted a 6th consecutive advance, which meant it closed just -0.008% beneath its own record high from late-September. And in Germany, the DAX (+1.01%) hit a new record once again, meaning its YTD gains now stand at +6.76%, the strongest of any major global equity index. That came alongside an increasingly optimistic tone in Europe, with the Franco-German 10yr yield spread down to its tightest in over two months, at 74bps, whilst Euro IG credit spreads are at their tightest in three years as well, at 96bps.

Elsewhere, we heard from several ECB speakers ahead of next week’s decision. Austria’s Holzmann suggested that it would be better “to wait a bit more” before the next rate cut, but there was no other pushback against a widely expected 25bps cut next week. ECB President Lagarde described the central bank as “on this sort of regular, gradual path”, while Spain’s Escriva said that a 25bp cut “feels like this is the most likely scenario” and Dutch central bank governor Knot noted that he was “pretty comfortable with the market expectations (for rate cuts in January and March)”. In all, those comments weren’t much of a surprise, and European rates traded in line with the global pattern for the most part, with yields on 10yr bunds (+2.1bps) and BTPs (+1.2bps) both moving higher, although French OATs (-0.7bps) outperformed.

Overnight in Asia, the market rally has continued for the most part, with Chinese equities leading the way, including the CSI 300 (+1.07%) and the Shanghai Comp (+1.35%). That’s been supported by comments from the China Securities Regulatory Commission, whose chairman said that mutual funds should increase their onshore equity holdings by at least 10% each year for the next 3 years. So for equity markets, that helped to offset concern about potential tariff threats. However, South Korean equities have underperformed this morning, with the KOSPI down -0.72%. That comes as South Korea’s growth data was weaker-than-expected overnight, with Q4 GDP only up by +0.1% (vs. +0.2% expected), and annual GDP for 2024 was up +2.0% (vs. +2.1% expected). That continues a pattern of pretty flat growth in recent quarters, with a -0.2% contraction in Q2, followed up by +0.1% growth in Q3 and Q4.

Over in Japan, the focus is increasingly turning to the Bank of Japan’s decision tomorrow, where markets are increasingly expecting another rate hike. Indeed, if they do announce a 25bp hike as expected, that would be the biggest hike since 2007, so it would continue the path towards monetary policy normalisation we’ve seen over the last year. In the meantime, the December trade data overnight showed that Japan’s trade surplus with the US was at ¥8.6 trillion in 2024, only slightly beneath the ¥8.7 trillion in 2023. Otherwise, the Nikkei (+0.97%) has continued to advance this morning, and its weekly advance of +4.11% as it stands would be its biggest since late September. Looking forward, US equity futures are only slightly lower, with those on the S&P 500 down -0.08%.

To the day ahead now, and data releases include the weekly initial jobless claims in the US, along with the European Commission’s preliminary consumer confidence reading for January in the Euro Area. Otherwise from central banks, we’ll hear from the ECB’s Escriva.

Puma shares crashed as much as 19% on Thursday, the largest intraday decline since September 2001. The selloff was triggered after the German sportswear company released preliminary 4Q24 net income figures that fell short of consensus analyst estimates. Also spooking investors, Puma announced a cost-efficiency program to curb margin pressures. 

Here’s a snapshot of Puma’s preliminary fourth-quarter results (courtesy of Bloomberg): 

• Prelim net income EU24 million, estimate EU54.5 million (Bloomberg Consensus)

• Prelim sales EU2.29 billion, estimate EU2.27 billion

• Prelim currency adjusted sales growth of 9.8%

• Prelim operating EBIT €109 million, vs € 94 million y/y

“Puma have pre-released their [fourth quarter/full year] results which are slightly below market expectations. Fourth quarter did not accelerate to the extent the market was anticipating with earnings and margin delivery also softer than expected,” analysts at RBC Capital Markets penned in a note to clients. 

“Overall, we expect the shares to be under pressure and anticipate consensus downgrades for 2025,” the analysts added.

Puma also announced cost cuts, with the aim of increasing the margin before interest and taxes to 8.5% by 2027. To achieve this, it said it would relocate staff to “strategic growth areas” such as marketing while keeping the total headcount “stable.”

Goldman’s Natasha de la Grense called the preliminary results a “pretty shocking print”:

Pretty shocking print in the context of 1) adidas pre-announcing positively, 2) Puma sounding confident on Q4 as recently as November. It’s a decent miss on Q4 EBIT (17%) driven by slightly worse cFX sales (+9.8% vs consensus +11.9%), GM but mostly opex. Simply reversing the €30m FX headwind last year should have got them to €124m EBIT and instead Q4 was €109m (consensus €131m) i.e. underlying profits down despite 9.8% sales growth. In addition, the 2025 8-8.5% margin target seems to have been pushed out as they are now talking to 8.5% by 2027 – consensus wasn’t quite there for next year (7.8%) and stock has pulled back recently on nervousness around 2025 margin guide but still think this optically looks poor. Bottom line, while “only” a 3% miss on FY24 EBIT, there is a growing credibility issue here and questions will be raised around that H125 order book (which had been guided up DD – similar to Q4 – and in the end Q4 wholesale was +6.9%).

The downgrade in profit margin guidance and cost-cutting efforts were enough to send shares in Frankfurt crashing by as much as 19%, the largest intraday decline since September 2001.

Here is additional commentary from Wall Street analysts (courtesy of Bloomberg): 

JPMorgan (neutral)

• Analyst Olivia Townsend calls the results “weak,” and says most of the sales shortfall against her estimates mainly came in the Americas region, where there was a surprising sequential deceleration in North America

• On the cost efficiency program, notes consumer discretionary companies tend to be rewarded in the long term for “earnings growth driven by the successful delivery of accelerating brand momentum (which we do not see much evidence of), rather than cost reduction”

• Results, along with those of Adidas, “demonstrate the importance of brand momentum” and make Adidas’s delivery seem even stronger

• PT cut to €42 from €47

Morgan Stanley (equal-weight)

• Analyst Grace Smalley says the change in commentary since November and launch of a cost efficiency program is likely driven by factors including a strengthening US dollar, increased tariff risk to China and slower momentum in Puma’s brand elevation strategy

• PT cut to €37 from €44

Citi (neutral)

• Analyst Monique Pollard says sales excluding FX were slightly softer than she had anticipated

• Net income also fell short of Pollard’s expectations; notes commentary from management on how this was caused by higher net interest expenses and higher non-controlling interests

Deutsche Bank (buy)

• Both the preliminary 4Q and FY results were “weaker than expected both from revenue and profitability perspective,” analyst Adam Cochrane writes

• PT cut to €55 from €60

Jefferies (hold)

• The new cost savings program as well as the shift of the margin target from 8%-8.5% in 2025 to 8.5% in 2027 suggests analyst estimate cuts for 2025 will be “significant despite a targeted step up in sales growth,” analyst James Grzinic writes

• If this happens, “the low valuation is unlikely to prove especially effective downside protection”

Bloomberg Intelligence

• “Higher costs to support Puma’s direct-to-consumer (DTC) segment are likely culprits to its weaker 2024 preliminary operating margin of 7.1%, which trailed consensus’ 7.3%,” analyst Poonam Goyal writes

Meanwhile, Puma’s struggles stand in stark contrast to those of its rival, Adidas AG, which reported solid earnings for the 4Q25, driven by high demand for its retro sneakers.

A top Russian official on Tuesday warned the Trump administration against taking over the Panama Canal after the president stated in his inaugural address that he intended to regain control of the strategic waterway.

Since the election, President Donald Trump has mentioned on several occasions that the United States should reassert control over the canal, which was built by Americans and controlled by the U.S. government until the Carter administration. Panama’s president has said that his government will not give up control of the canal.

As Jack Phillips reports for The Epoch Times, Trump’s comments prompted a response from Alexander Shchetinin, head of the Latin American department at the Russian Ministry of Foreign Affairs, who said that Moscow expects the leadership of Panama and the Trump administration to respect the “current international legal regime of this key waterway” during any discussions about control of the Panama Canal, according to a translation of comments reported by Russia’s state-run news agency TASS.

“Russia has been a party to the protocol since 1988 and reaffirms its obligations to respect the permanent neutrality of the Panama Canal, advocating for keeping this international transit waterway safe and open,” Shchetinin said, adding that the canal legally belongs to Panama.

The Panama Canal links the Pacific Ocean and the Caribbean Sea and is considered one of the most important trade routes in the world. About 40 percent of U.S. container ships pass through the waterway, according to the Center for Strategic and International Studies.

The U.S. government built the canal in the early part of the 20th century, starting under the administration of President Theodore Roosevelt, after it took over construction in 1904. Under President Jimmy Carter, negotiations started on handing over the waterway to the Panamanian government by the end of the 20th century.

Trump has said that Chinese entities are operating the canal, which he said is unacceptable. In his inauguration speech at the U.S. Capitol on Monday, Trump again spoke about the canal.

“American ships are being severely overcharged … and above all, China is operating the Panama Canal, and we didn’t give it to China, we gave it to Panama, and we’re taking it back,” he said.

Responding to Trump’s earlier comments, Panamanian President Jose Raul Mulino, in a video released on social media in December 2024, rejected arguments that the United States could reassert control over the canal.

“As president, I want to clearly state that every square meter of the Panama Canal and its adjoining zone is Panama’s and will remain so,” Mulino said at the time. “The sovereignty and independence of our country is non-negotiable.”

Trump has also suggested that the United States could take control over Greenland, the world’s largest island located in the North Atlantic that is currently part of Denmark’s territory.

Speaking to reporters on Monday as he signed executive orders in the White House, the president said he believes Denmark will “come along” on the possible sale of Greenland to the United States.

“Greenland is a wonderful place. We need fair, international security, and I am sure that Denmark will come along, I think. It’s costing them a lot of money to maintain it, to keep it,” he said.

Thailand could be the next home for a luxury yacht boom after “wealthy residents of Thailand caught the sailing bug during the COVID-19 pandemic,” according to a new Nikkei Asia report.

The enthusiasm wound up boosting marinas, yacht brokers, and related industries. Yacht traffic at Phuket, Koh Samui, and Pattaya surged 63% from 2022 to 2024, with over 2,000 trips through Phuket alone, according to the Ministry of Transport, the report says.

Recognizing the economic potential, Prime Minister Paetongtarn Shinawatra attended the Phuket boat show on Jan. 12. The global luxury yacht market, valued at $8.75 billion in 2024, is projected to grow to $17.3 billion by 2032, with the Asia-Pacific leading growth due to rising incomes, maritime tourism, and government support.

Paetongtarn said at the show: “The government is ready to fully support luxury marine tourism to continue to grow more.”

Lies Sol, a Phuket-based charter manager for yacht brokerage Northrop & Johnson told Nikkei: “The main aim is to get Thai people more familiar with yachting and let them grow into luxury yachts. Before you buy, why don’t you charter and learn what is essential for you?”

The Nikkei report says that Thailand’s Transport Ministry plans to lower the yacht charter license size requirement from 29 meters to 24 meters, increasing options for day trips and tours.

Former Prime Minister Thaksin Shinawatra has reportedly used chartered yachts for private political meetings, including with Malaysia’s Prime Minister Anwar Ibrahim.

At the Phuket boat show, Thai buyers remained discreet, while Russian, Chinese, British, and Australian enthusiasts were prominent. Over 5,000 visitors attended the expo, showcasing 50 yachts, since its debut in 2023.

As the report notes, competition from Malaysia and Indonesia is strong due to tax exemptions and relaxed regulations, drawing yacht owners away from Thailand.

And while Thailand promotes yachting as a luxury lifestyle, fuel costs, environmental concerns, and limited infrastructure remain challenges. Despite this, rising local interest, a strong resale market, and regional collaboration to position the Andaman Sea as a global yachting hub indicate significant growth potential.

Authored by Tsvetana Paraskova via OilPrice.com,

• The outgoing U.S. Administration on January 10 imposed the most severe sanctions on Russia’s oil yet.

• Many of the vessels transporting Russia’s oil from the Arctic and Far East Pacific fields and production clusters to Asia have now been sanctioned.

• India’s refiners have stopped doing business with the Russian tankers and companies sanctioned by the U.S., a source at the Indian government told Reuters on Monday.

One week into the latest – and most aggressive yet – U.S. sanctions on Russian oil exports, the Asian buyers of Russian crude are scrambling for alternative supply, the price of oil has rallied, and analyses suggest that more than 1 million barrels per day (bpd) of Moscow’s export volumes could be severely constrained, at least in the short term.

The outgoing U.S. Administration on January 10 imposed the most severe sanctions on Russia’s oil yet, designating two major Russian oil companies, Gazprom Neft and Surgutneftegas, as well as 183 vessels, dozens of oil traders, oilfield service providers, insurance companies, and energy officials.

Many of the vessels, specialized tankers, and shuttle tankers transporting Russia’s oil from the Arctic and Far East Pacific fields and production clusters to Asia have now been sanctioned. This puts around 1.5 million bpd of Russia’s crude flows from its Pacific and Arctic ports at risk, according to a Bloomberg analysis of the tankers now designated by the U.S.

Most of the flows from the Sakhalin projects require special ice-class tankers—all of these have been sanctioned. The storage tankers and specialized vessels servicing shipments, storage, and loadings at Murmansk are also under sanctions now. The Gazprom Neft fields on the Yamal peninsula will also find it much harder to export crude—the company itself has been sanctioned, as have all its seven ice-class tankers handling shipments at and through the Arctic Gates terminal.

In the Arctic and Russia’s Far East, the crude grades most severely hit by the sanctions are expected to be Sokol, Sakhalin, and ESPO, according to Bloomberg’s analysis.

The least affected shipments are likely to be those of the Urals crude grade from the Baltic and Black Sea, which are mostly going to India.  
Only a quarter of Russia’s shipments of Urals since October were carried on now-sanctioned tankers. That’s the smallest share of designated tankers of any Russian crude grade, Bloomberg’s analysis showed.

The sanctions are already roiling the market. India and China are racing to procure alternative supply while studying the wider implications of the U.S. sanctions on Russian oil deliveries six months from now.

The sanctions caught a few million barrels of crude oil en route to India in a precarious situation. There is a wind-down period until February 27 for parties to complete dealings with now-sanctioned entities and vessels. Indian state-held refiners are targeting to settle the payments for Russian oil in half the time they have taken so far, as part of efforts to complete the deals before the seven-week wind-down period in the latest U.S. sanctions ends.

India’s refiners have stopped doing business with the Russian tankers and companies sanctioned by the U.S., a source at the Indian government told Reuters on Monday.

India doesn’t expect major disruptions during the wind-down period until March.

But “Going forward, it’s early days yet to anticipate the impact, how discounts shape up, if somebody is willing to sell below the $60 price cap,” a source with the Indian government told Reuters earlier this week.

Indian officials and refiners held emergency meetings to discuss the implications of the sanctions on the exports of its single largest crude oil supplier. China’s independent refiners have also held emergency meetings to discuss the fallout and a workaround for the sanctions, sources tell Bloomberg.

Fleet capacity to service Russian exports is expected to tighten significantly, according to Mary Melton, a freight analyst at Vortexa.

So far, U.S. sanctions on individual vessels have been very effective in limiting further employment in Russian trade, Melton said this week.

According to Vortexa, the most likely scenario for Russian crude exports going forward is that they will most likely face serious logistical difficulty due to the lack of available tonnage.

“In order to keep export volumes at the same level, Russia will be forced to sell crude below the price cap. At that point, Western vessel operators would be able to get involved to lift Russian crude,” Vortexa’s Melton noted.

However, greater adherence to the Russian price cap will depend on China’s stance on allowing sanctioned vessels to call in its ports, Vortexa reckons.

Authored by Alastair Crooke,

The essayist and military strategist, Aurelien, has written a paper entitled: The Strange Defeat (original in French). The ‘strange defeat’ being that of Europe’s ‘curious’ inability to understand Ukraine or its military mechanics.

Aurelien highlights the strange lack of realism by which the West has approached the crisis —

“ …and the almost pathological dissociation from the real world that it displays in its words and actions. Yet, even as the situation deteriorates, and the Russian forces advance everywhere, there is no sign that the West is becoming more reality-based in its understanding – and it is very likely that it will continue to live in its alternative construction of reality until it is forcibly expelled”.

The writer continues in some detail (omitted here) to explain why NATO has no strategy for Ukraine and no real operational plan:

“It has only a series of ad hoc initiatives, linked together by vague aspirations that have no connection with real life plus the hope that ‘something [beneficial] will occur’. Our current Western political leaders have never had to develop such skills. Yet it is actually worse than that: not having developed these skills, not having advisers who have developed them, they cannot really understand what the Russians are doing, how and why they are doing it. Western leaders are like spectators who do not know the rules of chess or Go – and are trying to figure out who is winning”.

“What exactly was their goal? Now, responses such as ‘to send a message to Putin’, ‘complicate Russian logistics’, or ‘improve morale at home’ are no longer allowed. What I want to know is what is expected in concrete terms? What are the tangible results of their ‘messaging’? Can they guarantee that it will be understood? Have you anticipated the possible reactions of the Russians – and what will you do then?”

The essential problem, Aurelien bluntly concludes, is that:

“our political classes and their parasites have no idea how to deal with such crises, or even how to understand them. The war in Ukraine involves forces that are orders of magnitude larger than any Western nation has deployed on operations since 1945 … Instead of real strategic objectives, they have only slogans and fanciful proposals”.

Coldly put, the author explains that for complex reasons connected with the nature of western modernity, the liberal élites simply are not competent or professional in matters of security. And they do not understand its nature.

U.S. cultural critic Walter Kirn makes rather similar claims in a very different, yet related, context: California Fires and America’s Competency Crisis –

“Los Angeles is in flames, yet California’s leaders seem helpless, unmasking a generation of public investment in non-essential services [that leaves the Authorities floundering amidst the predicted occurrence of the fires]”.

On a Joe Rogan podcast earlier this month, a firefighter goes: “It’s just going to be the right wind and fire’s going to start in the right place and it’s going to burn through LA all the way to the ocean, and there’s not a f***ing thing we can do about it”.

Kirn observes:

“This isn’t the first fire or set of fires in Malibu. Just a few years ago, there were big fires. There always are. They’re inevitable. But having built this giant city in this place with this vulnerability, there are measures that can be taken to contain and to fend off the worst”.

“To fob it off on climate change, as I say, is a wonderful thing to tell yourself, but none of this started yesterday. My only point is this, has it done everything it can to prepare for an inevitable, unavoidable situation that perhaps in scale differs from the past, but certainly not in kind? Are its leaders up to the job? There’s not a lot of sign that they are. They haven’t been able to deal with things like homelessness without fires. So the question of whether all those things have been done, whether they’ve been done well, whether there was adequate water in fire hydrants, whether they were working at all, things like that, and whether the fire department was properly trained or properly staffed, all those questions are going to arise”.

“And as far as the competency crisis goes, I think that there will be ample material to portray this as aggravated by incompetence. California’s a state that’s become notorious for spending a lot of money on things that don’t work, on high-speed rail lines that never are constructed, on all sorts of construction projects and infrastructure projects that never come to pass. And in that context, I think this will be devastating to the power structure of California”.

“In a larger sense though, it’s going to remind people that a politics that has been for years now about language and philosophical constructs such as equity and so on, is going to be seen as having failed in the most essential way, to protect people. And that these people are powerful and influential and privileged is going to make that happen faster and in a more prominent fashion”.

To which his colleague, journalist Matt Taibbi, responds:

“But pulling back in a broader sense, we do have a crisis of competency in this country. It has had a huge impact on American politics”. Kirn: “[Americans] They’re going to want less concern for the philosophical and/or even long-term political questions of equity and so on, I predict, and they’re going to want to lay in a minimum expectation of competence in natural disasters. In other words, this is a time when the priorities shift and I think that big change is coming, big, big change, because we look like we’ve been dealing with luxury problems, and we’ve certainly been dealing with other countries’ problems, Ukraine or whoever it might be, with massive funding. There are people in North Carolina right now still recovering from a flood and having a very difficult time as winter comes, which it doesn’t in LA in the same way, or as winter consolidates itself, I guess”;

“So looking forward, it’s not a question of blame, it’s what are people going to want? What are people going to value? What are they going to prize? Are their priorities going to shift? I think they will shift big time. Los Angeles will be a touchstone and it will be a touchstone for a new approach to government”.

So we have this ‘divorce from reality’ and consequent ‘Competency Crisis’ – whether in California; Ukraine or Europe. Where lie the roots to this malaise? U.S. writer David Samuels believes this to be the answer:

“In his last days in office … President Barack Obama made the decision to set the country on a new course. On Dec. 23, 2016, he signed into law the Countering Foreign Propaganda and Disinformation Act, which used the language of defending the homeland to launch an open-ended, offensive information war, a war that fused the security infrastructure with the social media platforms – where the war supposedly was being fought”.

However, collapse of the 20th-century media pyramid and its rapid replacement by monopoly social media platforms, had made it possible for the Obama White House to sell policy – and reconfigure social attitudes and prejudices – in entirely new ways.

During the Trump years, Obama used these tools of the digital age to craft an entirely new type of power centre for himself – one that revolved around his unique position as the titular, though pointedly never-named, head of a Democratic Party which he succeeded in refashioning in his own image, Samuels writes.

The ‘permission structure’ machine that Barack Obama and David Axelrod (a highly successful Chicago political consultant), built to replace the Democratic Party was in its essence a device for getting people to act against their beliefs by substituting new and ‘better’ beliefs through the top-down controlled and leveraged application of social pressure – effectively turning Axelrod’s construct into ‘an omnipotent thought-machine’, Samuels suggests:

“The term ‘echo chambers’ describes the process by which the White House and its wider penumbra of think tanks and NGOs deliberately created an entirely new class of experts who mutually credentialed each other on social media in order to advance assertions that would formerly have been seen as marginal or not credible”.

The aim was for a platoon of aides, armed with laptops or smart phones, to ‘run’ with the latest inspired Party meme and to immediately repeat, and repeat it, across platforms, giving the appearance of an overwhelming tide of consensus filling the country. And thus giving people the ‘permission structure’ of apparent wide public assent to believe propositions that formerly they would never have supported.

“Where this analysis went wrong is the same place that the Obama team’s analysis of Trump went wrong: The wizards of the permission structure machine had become captives of the machinery that they built. The result was a fast-moving mirror world that could generate the velocity required to change the appearance of “what people believe” overnight. The newly minted digital variant of “public opinion” was rooted in the algorithms that determine how fads spread on social media, in which mass multiplied by speed equals momentum—speed being the key variable”.

“At every turn over the next four years, it was like a fever was spreading, and no one was immune. Spouses, children, colleagues, and supervisors at work began reciting, with the force of true believers, slogans they had only learned last week. It was the entirety of this apparatus, not just the ability to fashion clever or impactful tweets, that constituted the party’s new form of power”.

“In the end, however, the fever broke”. The credibility of Élites imploded.

Samuels account amounts to a stark warning of the danger associated with distance opening up between an underlying reality and an invented reality that could be successfully messaged, and managed, from the White House. “This possibility opened the door to a new potential for a large-scale disaster – like the war in Iraq”, Samuels suggests. (Samuels does not specifically mention Ukraine, although this is implied throughout the argument).

This – both the Obama tale, as told by David Samuels, and Walter Kirn’s story of California – augment Aurelien’s point about Ukraine and European military incompetence and lack of professionalism on the field: It is one of allowing a schism to open up between contrived narrative and reality – “which”, Samuels warns “is to say that, with enough money, operatives could create and operationalize mutually reinforcing networks of activists and experts to validate a messaging arc that would short-circuit traditional methods of validation and analysis, and lead unwary actors and audience members alike to believe that things that they had never believed; or even heard of before: Were in fact not only plausible, but already widely accepted within their specific peer groups”.

It constitutes the path to disaster – even risking nuclear disaster in the case of the Ukraine conflict. Will the ‘Competency Crisis’ reaching across such varied terrain trigger a re-think as Walter Kirn – a writer on cultural change – insists?