Next Wednesday Presidents Joe Biden and Xi Jinping plan to meet in San Francisco on the sidelines of the Asia-Pacific Economic Cooperation summit, a Friday White House statement has confirmed. 

Biden’s press secretary Karine Jean-Pierre outlined that the two will discuss the “continued importance of maintaining open lines of communication” and how the two large economic and military powers “can continue to responsibly manage competition and work together where our interests align, particularly on transnational challenges that affect the international community.”

The November 15 meeting will be merely the second face-to-face meeting Biden has held with Xi since the start of his presidency, and will happen at the end of a year that witnessed spiraling relations, especially after the February spy balloon fiasco and shootdown.

High on the agenda alongside trade will be geopolitical flashpoint situations like Ukraine, the Israel-Hamas war, and of course security issues related with Taiwan.

The Taiwan situation deteriorated when last year then Speaker Nancy Pelosi made a brief visit to the self-ruled island, leading China to launch unprecedented encircling war drills, and to break off military-to-military communications with the Pentagon.

The Biden administration has since said it’s determined to restore communications and cooperation on the military front, especially to avoid misunderstandings, as dangerous Chinese intercepts of US and allied spy planes over seas off China’s coast have grown.

According to sources who spoke to the BBC: 

Mr Biden is “determined” to restore those channels, US officials said, but China appeared to be “reluctant” to do so. “This is not the relationship of five or 10 years ago, we’re not talking about a long list of outcomes or deliverables,” one of the officials said.

“The goals here really are about managing the competition, preventing the downside of risk – of conflict, and ensuring channels of communication are open.”

As for pressing geopolitical and foreign policy issues, Beijing has increasingly broken from the Western consensus on both Ukraine and Gaza.

“Distancing themselves from Israel, Russia and China have since focused on framing the war as part of a global power struggle against the U.S., with Israel reduced to little more than Washington’s regional pawn,” The Wall Street Journal has pointed out.

Authored by Eric Lundrum via American Greatness,

On Wednesday, a professor at Princeton University tweeted that he considered the idea of humans having sex with animals to be “thought-provoking.”

According to the Daily Caller, Peter Singer is a bioethics professor at Princeton’s University Center for Human Values.

He also describes himself as an animal rights activist, having written such books as “Why Vegan? Eating Ethically,” and “Animal Liberation Now.”

In the tweet in question, Singer posted a link to a journal article titled “Zoophilia is Morally Permissible,” which he described as “thought-provoking” and said “challenges one of society’s strongest taboos.”

“This piece challenges one of society’s strongest taboos and argues for the moral permissibility of some forms of sexual contact between humans and animals. This article offers a controversial perspective that calls for a serious and open discussion on animal ethics and sex ethics,” Singer posted on X, the platform formerly known as Twitter.

The article, written under the pseudonym “Fira Bensto,” declares that there is “nothing wrong” with humans having sex with animals. It was first published in October in the “Journal of Controversial Ideas.”

“Sex with animals is a powerful social taboo that exposes its practitioners to utmost indignation and stigma,” the article reads in part.

“Zoophilia is one of the few sexual orientations (along with e.g. necrophilia or pedophilia) that remain off­-limits and have been left aside from the sexual liberation movement in the past fifty years. I would like to argue that this is a mistake. There is in fact nothing wrong with having sex with animals: it is not an inherently problematic sexual practice.”

Singer has voiced other bizarre opinions in the past, including arguing that people should avoid eating meat in order to prevent global warming and to encourage a more “humane” treatment of animals.

“The year of the first Earth Day, 1970, was the year I stopped eating meat,” Singer once wrote in the New York Times.

“I didn’t do it to save the Earth, but because I realized that there is no ethical justification for treating animals like machines for converting feed into meat, milk and eggs.”

Two weeks after images posted on Reddit showed a pre-production B-21 Raider stealth bomber taxiing at Air Force Plant 42 in Palmdale, California, Bloomberg confirmed Friday morning that the next-generation stealth bomber has taken flight for the first time. 

Northrop Grumman Corp.’s B-21 Raider is in flight testing, a step in the test campaign managed by the Air Force Test Center and 412th Test Wing’s B-21 Combined Test Force, according to an Air Force spokesperson. -Bloomberg

Here’s a video posted on the social media platform X showing the B-21 flying across the sky. 

B-21 RAIDER FIRST FLIGHT 11-10-23 #RAIDER33 #B21Raider pic.twitter.com/3tEKudqDiw

— Matt Hartman (@ShorealoneFilms) November 10, 2023

Just in time for the military-industrial complex’s next conflict?

In a setback for the Democratic Party’s ambition to retain control of the US Senate after 2024, Senator Joe Manchin will not seek re-election next year, the centrist West Virginia Democrat announced on Thursday. At the same time, he raised the possibility of causing more mischief for the Democrats, as he also teased a potential independent bid for the White House. 

Manchin’s move will almost certainly deliver his senate seat to the Republicans. By one measure, West Virginia is the reddest state of all: In 2020, Trump won the Mountain State by a 38.9% margin, his biggest trouncing of Biden anywhere.

Even before Manchin’s announcement, the Washington Post declared the “2024 Senate map is a GOP dream.” Republicans need just a two-state pickup to take over the Senate — unless America elects a Republican vice-president/Senate tie-breaker. In that latter scenario, taking West Virginia could be all they need, provided they can hold existing Republican seats. Montana Democrat Jon Tester is also in jeopardy.

Joe Manchin news is pretty bad; he will be replaced by someone with much worse politics who will caucus with the Republicans, and the party can redirect the money they were going to spend attacking him going after Dem seats in OH/AZ/PA/WI/MI (need 1). Plus he could run for pres.

— Matthew Gertz (@MattGertz) November 9, 2023

Manchin first entered the Senate in 2010 in a special election that determined who would represent West Virginia for the remaining two years of the term of Senator Robert Byrd, who died in June of that year. He was twice re-elected to office. However, Manchin was in for a tough 2024 re-election fight against popular Republican West Virginia Governor Jim Justice, who was leading in polls.

The 76-year-old isn’t riding off into the sunset. Indeed, his words on Thursday felt more like a campaign speech than a retirement announcement: 

“I’ve made one of the toughest decisions of my life and decided that I will not be running for re-election to the United States Senate, but what I will be doing is traveling the country and speaking out to see if there is an interest in creating a movement to mobilize the middle and bring Americans together.”

If he does run for president, he’s likely to do so via No Labels, the political group that sets out to give political power to the what it calls the “commonsense majority” that lies between the polarized right and left. No Labels says it’s laying the groundwork for a presidential “Unity Ticket 2024,” but will only do so “if the two major parties select candidates the vast majority of Americans don’t want to vote for in 2024.”

The group says it will decide by “early 2024.” If it’s Trump vs Biden, expect No Labels to plunge in. The group already has a glimmer in its eye for Manchin: On Thursday, No Labels issued a statement fawning over Manchin, calling him “a tireless voice for America’s commonsense majority and a longtime ally of the No Labels movement.” The group stopped short of an endorsement, saying, “Regarding our No Labels Unity presidential ticket, we are gathering input from our members across the country to understand the kind of leaders they would like to see in the White House.”

The grifters at the anti-Trump Lincoln Project aren’t enthused about the prospect of a Manchin run via No Labels. “Don’t be fooled. Joe Manchin is leaving the Senate so that he can run for President with No Labels as a third-party spoiler to President Biden,” they said via the platform formerly known as Twitter, attaching a video suggesting No Labels is actually a dark-money conspiracy to re-elect Trump. 

Politico credits Senate Minority Leader Mitch McConnell with engineering Manchin’s Senate departure by first encouraging Republican West Virginia Governor Jim Justice to challenge for the seat, and then by having Montana Senator Steve Daines persuade Trump into endorsing Justice.

“You can do the math. If we don’t lose any incumbent — and I don’t think we will — he’s No. 50. And one step closer to having a majority,” McConnell said, referring to Justice. “I’ve been involved in a lot of recruiting over the years, some successfully, some not. But I think that’s the best recruiting job I ever did.”

At the same time, Senate Majority Leader Chuck Schumer had been on a personal campaign to persuade Manchin to stay in the race, reports the New York Times. 

Republicans experienced a massive disappointment when an anticipated and poll-predicted “Red Wave” in 2022 failed to materialize, resulting in a lackluster House takeover, while the party fell short of a Senate takeover. 

Manchin was a thorn in the side of the Democratic Party’s progressive wing.  “Joe Manchin watered down the Democratic economic agenda, made the cost of raising children higher and billionaire taxes lower, and now doesn’t even run for re-election,” Adam Green of the Progressive Change Campaign Committee told the Times.

Manchin sold out his state with the inflation reduction act and knows that made him unreelectable. https://t.co/qwHVlml11i

— The Redheaded libertarian (@TRHLofficial) November 9, 2023

Authored by Simon White, Bloomberg macro strategist,

The Treasury rally saw an abrupt turnaround on Thursday, with yields climbing over 15 bps. This came on the back of overbought conditions in bonds and stocks, with the S&P dropping 0.8%. The curve ball came in the 30-year auction, having the worst tail in over 10 years. This will exacerbate already-poor liquidity conditions in the Treasury market, and mean rallies are unlikely to be sustained for long.

Treasury auctions normally don’t make much news, but Thursday’s 30-year sale saw the worst tail (median – high yield) since August 2011, when the S&P downgraded the US from its AAA rating. Primary dealers, who backstop auctions, had to take a quarter of the issue, double the proportion they take on average.

Ever-larger government issuance and the Federal Reserve’s hiking cycle have amplified fixed-income volatility.

As the chart below shows, high fixed-income vol goes hand in hand with worsening liquidity in the Treasury market. Bloomberg’s US Treasury Liquidity Index compares yields to a fitted curve; the greater the gap between actual versus fitted values, the worse liquidity is likely to be.

Worsening liquidity increases the possibility of future weak auctions – one of the reasons investors like Treasuries is that they are “safe,” and stable. As their volatility rises and liquidity falls, they will become less attractive. Moreover, their utility to multi-asset investors as a portfolio and a recession hedge when the stock-bond correlation is positive will wane, reducing demand further.

[ZH: As we detailed yesterday, the powers that be already had an excuse ready for the dismal 30Y auction and the dismal-er liquidity situation in Treasuries.]

As The FT reported that a ransomware attack on the Industrial and Commercial Bank of China has disrupted the US Treasury market, according to market participants.

The attack prevented ICBC from settling Treasury trades on behalf of other market participants, according to traders and banks.

“This is a large party on [the Fixed Income Clearing Corporation], so certainly of major concern,” said an executive at a large bank that clears US Treasuries.

“And potentially impacting liquidity of US Treasuries.”

ICBC was starting to restore services as of Thursday afternoon, according to some of the people briefed on the incident.

The problem is – for this narrative – that Treasury liquidity worsened this afternoon – AFTER ICBC was back…

Source: Bloomberg

[ZH: This ‘excuse’ is even more problematic…]

So the US Treasury market was allegedly crippled by a hack of China’s largest bank.

Isn’t the bigger story here that a Chinese bank can paralyze the $75 trillion US bond market?

— zerohedge (@zerohedge) November 10, 2023

The increasingly poor backdrop for Treasuries means the chance of an auction failure, in the sense the bid-to-cover ratio comes in under one, is now non-negligible.

All of this makes it more likely Treasury Secretary Janet Yellen continues to keep funding skewed towards bills for longer.

Overall, Treasuries will continue to face more downside than upside risk, especially as the chance of a near-term recession has receded.

Just when it seemed that stocks were about to go on a 9-day winning streak, Fed chair Jerome Powell opened his mouth, said to shut the “fucking door“, and crashed stonks (the catastrophic 30Y auction just minutes earlier didn’t help) ending what would have been the longest streak since 2004.

And on to Friday morning, where after yesterday’s rout, stocks and bonds rebounded modestly even as investors speculated that more central bank speakers today will echo the hawkish message from Powell. As of 8:00am, S&P futures rose 0.25% to 4,373, rising off the worst levels of the day, while Nasdaq futures gained 0.1%; meanwhile in Europe the Stoxx 600 shed 1%, reinforced by poor earnings reports. The dollar is little changed while Treasury yields are marginally higher across the curve; energy outperforms with WTI futures up about 1% on the day

In premarket trading, energy shares rose along with oil, with West Texas Intermediate climbing back above $76 a barrel.  Digital advertising firm Trade Desk slumped as much as 31% in out-of-hours trading in New York after issuing a weak sales guidance, which it blamed on broader economic pressures. And watch casino stocks after their shares had a terrible day in Hong Kong. Here are the other notable premarket movers:

• Blink Charging Co. shares rose 14% after the company revised FY 2023 sales higher. The company reported EPS below estimates and sales above estimates.
• Groupon shares slumped 32% after the firm reported adjusted loss per share for the third quarter that missed the average analyst estimate. Eric Lefkofsky, a co-founder of the company, informed the firm of his decision to resign as a member of the Board effective Nov. 9.
• Illumina shares slump 12% after the DNA-sequencing company cut its full-year revenue guidance. The company also reported third-quarter product revenue that missed estimates. Canaccord Genuity downgraded its recommendation on the stock to hold, saying the near-term outlook appeared “soft.”
• Plug Power shares fell 29% after the company, which makes machines that produce hydrogen and use it as a fuel, flagged going concern warnings after reporting a weak 3Q. RBC Capital Markets downgraded to sector perform from outperform, citing limited visibility and margin pressures.
• Toast shares edge higher, up 2.0%, as Baird raises its recommendation on the restaurant-software company’s stock to outperform from neutral. The broker says the upgrade comes after the stock has fallen nearly 50% from mid-year highs.
• Trade Desk shares plummet 27% after the advertising technology company gave a fourth-quarter forecast that was weaker than expected for both revenue and adjusted Ebitda. Analysts cut price targets noting that the weak guidance overshadowed an otherwise strong quarter.
• Unity Software shares fall 13% after the video-game tool maker reported third-quarter revenue that missed expectations. It also said it had started a “comprehensive assessment of our product portfolio,” and that as a result it would not be giving an outlook.
• Wynn Resorts shares dropped 5.2% after the casino operator reported third-quarter Macau adjusted property Ebitdar that missed estimates. While the company performed well in Las Vegas, analysts focused on Macau, with Barclays saying the margins and commentary were disappointing.

“Powell’s speech was a sort of a talk-tough moment as central banks have to convince the market there will be no pivot coming tomorrow morning,” said Erick Muller, head of product and investment strategy at Muzinich & Co. in London. “Each time they see markets pricing too many rate cuts, you will hear this kind of speech saying, ‘stop right there’.”

Investors are now waiting to hear from ECB President Christine Lagarde, who will participate in a fireside chat later on Thursday. Comments are also due from from Dallas Fed President Lorie Logan, her Atlanta counterpart Raphael Bostic and San Francisco Fed’s Mary Daly. Markets were rattled yesterday after Powell said officials won’t hesitate to tighten if needed

European bonds and stocks are both in the red, tracking losses in their US counterparts on Thursday after hawkish comments by Fed Chair Powell and a soft 30-year bond auction. The Stoxx 600 is down 1% and set for its largest one-day drop in three weeks. Consumer product, food/beverage and mining shares are leading declines. Diageo plunged 16% after the UK distiller cut its profit outlook and Richemont lost 6.8% as revenue from luxury watches unexpectedly fell.  There was a brief glitch in the updating of FTSE Russell indexes overnight in the UK, Italy and South Africa, which was fixed after about 38 minutes. Here are the most notable European movers:

• Allianz shares rise as much as 2.3% after the German insurer reported third quarter operating profit that beat the average analyst estimate, with Jefferies “pleasantly” surprised by the results
• GN Store Nord shares jump as much as 14%, the most since April 27, after the Danish hearing-aids maker reported results for the third quarter, narrowed its organic revenue forecast for the year and announced new cost savings
• OTP Bank shares climb as much as 2.3% after Budapest-based lender reported a third-quarter income beat thanks mainly to its profitable subsidiaries outside Hungary
• Mol shares climb as much as 1.2% after Hungary-based refiner raised its 2023 guidance for Clean CCS Ebitda after third-quarter beat estimates
• JCDecaux shares rise as much as 5.1% after the outdoor advertising company reported better-than-expected organic revenue growth in 3Q
• IMCD rises as much 5.1% after nine-month revenue came in lower than the prior year but KBC says the decline was a “modest” 1% in constant currency terms
• Bpost rises as much as 6.1% after the postal company reported third-quarter adjusted Ebit that beat estimates and reinstated its full-year earnings outlook after market hours on Thursday
• Valneva shares rise as much as 14% in Paris, the most since June 20, after the US FDA approved the French biotechnology firm’s chikungunya vaccine
• Diageo shares slide as much as 12%, the biggest intraday decline since 1997, after the alcoholic beverage company warned on profit, citing a “materially weaker” performance in Latin America and Caribbean
• Richemont dropped by as much as 5.3%, dragging European luxury stocks sharply lower, after the Swiss group reported an unexpected drop in earnings due to declining sales for its watches and faced adverse currency effects
• Shurgard falls as much as 6.4% after an offering of up to 8.16m new shares priced at €36.75 apiece, representing a 7% discount to last close
• Stabilus shares fall as much as 5.2%, the most since May. The German machinery manufacturer’s fresh guidance and Ebit margin for the full year looked “a bit conservative,” according to Oddo

Earlier in the session, Asian stocks declined as disappointing earnings hit Chinese and Japanese stocks along with a jump in Treasury yields after cautious comments by Federal Reserve Chair Jerome Powell. The MSCI Asia Pacific Index fell as much as 1.1%, erasing its gain for the week, with Chinese internet giants Alibaba and Tencent among the biggest drags. Japan’s SoftBank and Sony also weighed on the gauge after their results missed expectations. All major markets in the region were in the red Friday.

• Hong Kong benchmarks were the biggest decliners after after weak profit reports from chipmaker SMIC and casino operator Wynn Macau, while a cyberattack on China’s largest lender ICBC also weighed on sentiment. A report this week showed the Chinese economy has tipped back into deflation, exacerbating concerns over the fragility of the economic recovery.
• Australia’s ASX 200 initially saw the shallowest losses among the majors as the RBA’s SoMP suggested the economy had been a bit stronger than previously thought, while sectoral losses were led by Tech, Financials, and Energy although Metal and Mining bucked the trend.
• Japan’s Nikkei 225 was dragged lower by hefty post-earnings losses in Nissan, Sony, and Softbank, which were all lower by 3-6%, although the index later clambered off worst levels and rose back above 32,500.
• Indian stocks posted a late recovery to end higher, outperforming most Asian peers that fell on lackluster earnings from Chinese firms and hawkish comments from Fed Chair Powell.

In FX, the Bloomberg Dollar Spot Index is little changed. The pound falls 0.1% after showing little reaction to a slight beat for UK GDP. The Norwegian krone is the best performer, rising 0.7% versus the greenback after data showed inflation accelerated in October.  A four-day rally in the Bloomberg Dollar Spot Index stalled as traders weighed the outlook for Fed policy and higher US yields. The gauge had gained 0.9% in the past four days as yield on policy-sensitive Treasury two-year notes rose 18 basis points. Traders now await the October US inflation data due on Tuesday. “The CPI next week will be the key driver for the dollar” following Powell’s comments, said Mingze Wu, a foreign-exchange trader at StoneX Group in Singapore. “The market is adjusting itself without any further inputs from Fed”

In rates, treasuries were narrowly mixed across the curve, broadly holding losses spurred Thursday by poor 30-year bond auction and hawkish Powell comments. Long-end underperforms, causing another bounce by 5s30s spread off 10bp level that’s been flagged as key support and a pain threshold for steepener positions. US yields are within 3bp of Thursday’s closing levels with long-end lagging slightly; 10-year TSYs dropped to 4.60% with bunds and gilts lagging by 7.5bp and 6bp in the sector, narrowing gaps that opened as Treasuries slumped toward the end of the US trading day. German 10-year yields rose 8bps while the UK equivalent adds 7bps. The dollar IG issuance slate empty so far; only one deal priced Thursday, taking weekly volumes above $43b; dealers’ forecast was for about $40b. US economic data scheduled for the session includes November preliminary University of Michigan sentiment at 10am

In commodities, crude prices advance, with WTI rising 1% to trade near $76.50. Spot gold falls 0.3%. Gold dropped 0.3%. The metal is set for a second weekly drop after fears eased that the Israel-Hamas conflict will broaden into a region-wide war. 

Bitcoin extended recent gains, rising above $37,000 but it was Ethereum that stole the show suring above $2,100 after BlackRock’s Ethereum ETF plan was confirmed in a Nasdaq filing, according to CoinDesk.

Looking to the day ahead now, and data releases include UK GDP for Q3, Italian industrial production for September, and the University of Michigan’s preliminary consumer sentiment index for November. Otherwise, central bank speakers include ECB President Lagarde, Bundesbank President Nagel, and the Fed’s Logan and Bostic.

Market Snapshot

• S&P 500 futures up 0.3% at 4,374
• STOXX Europe 600 down 0.8% to 444.21
• MXAP down 0.9% to 155.80
• MXAPJ down 1.2% to 486.33
• Nikkei down 0.2% to 32,568.11
• Topix little changed at 2,336.72
• Hang Seng Index down 1.8% to 17,203.26
• Shanghai Composite down 0.5% to 3,038.97
• Sensex little changed at 64,886.09
• Australia S&P/ASX 200 down 0.5% to 6,976.49
• Kospi down 0.7% to 2,409.66
• German 10Y yield little changed at 2.72%
• Euro little changed at $1.0667
• Brent Futures up 0.8% to $80.65/bbl
• Gold spot down 0.2% to $1,954.02
• U.S. Dollar Index little changed at 105.94

Top Overnight News

• The UK economy flatlined in the third quarter, defying forecasts of a small contraction and ensuring a recession is avoided this year, as strong trade came to the rescue of poor domestic activity.
• On Thursday, trades handled by the world’s largest bank in the globe’s biggest market traversed Manhattan on a USB stick. Industrial & Commercial Bank of China Ltd.’s US unit had been hit by a cyberattack, rendering it unable to clear swathes of US Treasury trades after entities responsible for settling the transactions swiftly disconnected from the stricken systems.
• One of the most high-profile blockchain systems in traditional banking has added a new feature that lets companies shift cash automatically. JPMorgan Chase & Co’s JPM Coin now allows clients to program their accounts by plugging in a set of key conditions, enabling them to move funds to cover overdue payments and margin calls.

More detailed look at global markets courtesy of Newsquawk

APAC stocks traded lower across the board as the downbeat sentiment from Wall Street reverberated to the region following the poor 30-year US auction coupled with Powell’s hawkish lean, whilst the APAC region itself digested earnings and China’s ongoing woes. ASX 200 initially saw the shallowest losses among the majors as the RBA’s SoMP suggested the economy had been a bit stronger than previously thought, while sectoral losses were led by Tech, Financials, and Energy although Metal and Mining bucked the trend. Nikkei 225 was dragged lower by hefty post-earnings losses in Nissan, Sony, and Softbank, which were all lower by 3-6%, although the index later clambered off worst levels and rose back above 32,500. Hang Seng and Shanghai Comp conformed to the tone but Hong Kong was the regional underperformer with Tech and Financials, among the biggest losers.

Top Asian News

• A ransomware attack on the Industrial and Commercial Bank of China has disrupted the US Treasury market by stopping China’s largest bank from settling Treasury trades, according to market participants cited by FT. SIFMA told members on Thursday that ICBC had been hit by ransomware software. The attack prevented ICBC from settling Treasury trades on behalf of other market participants. ICBC (1398 HK) Financial Services confirmed they experienced a ransomware attack that resulted in disruption to certain FS systems, according to Reuters.
• PBoC Governor said they are closely watching financial risks in some sectors; some provinces are facing a certain degree of debt risks and the central government is paying high attention to the matter, via state media
• PBoC policy adviser said China is able to achieve slightly above 5% GDP growth this year; consumption recovery still remains weak; fiscal deficit ratio can be raised next year. China’s exports are still expected to face relatively big pressure next year. Weak external demand and inadequate domestic demand increase overcapacity pressure in China, according to Reuters.
• China Vice Premier He Lifeng said the important task for the meeting with US Treasury Secretary Yellen is to implement tasks from US President Biden and Chinese President Xi. He added talks with Yellen have been constructive, and will communicate China’s concerns about their economic and investment relationship with the US. Looking for effective measures to put US-China economic and trade relations back on track, according to Reuters.
• Country Garden Holdings (2007 HK) reportedly aims to inform key bondholders of its cash flow projections by year-end, according to Reuters sources; aims for a tentative plan to restructure offshore debt by year-end, and aims to start formal negotiations with offshore bondholders by February or March next year, sources added.
• PBoC injected CNY 203bln via 7-day reverse repos with the rate at 1.80% for a CNY 160bln net daily injection.
• Japanese government to top up fiscal loan and investment program with additional JYP 886bln in a second extra budget to beef up supply chain, according to a draft cited by Reuters.
• Japan mulls a 5%+ wage hike as a condition for tax breaks, via Sankei.
• BoJ is to conduct broad-based survey of companies behaviour since mid-90’s; to be conducted between Nov’23-Feb’24 as part of its long term monetary policy review.
• RBA SoMP: considered the option to continue to hold policy rates steady but decided a hike would provide more assurance on inflation; Whether further tightening of monetary policy will depend on data. Click here for the full headline.
• New Zealand PM Hipkins said the Governor General will be advised to extend current caretaker government arrangements until a new government is formed, according to Reuters.

European bourses reside in the red, Euro Stoxx 50 -0.8%, though the region is on track to end the week around the unchanged mark overall. Action which comes as a continuation of the post-Powell/auction hit to sentiment experienced in Thursday’s US session. Sectors are primarily softer with Food, Beverage & Tobacco hit as Diageo cuts guidance, Consumer Products/Services sold post-Richemont while Real Estate slips on SBB and Redrow. Energy bucks the trend and is modestly firmer as benchmarks attempt to once again recoup from recent pressure. Stateside, futures are near the unchanged mark within -0.2% to +0.2% parameters with the ES flat and the NQ lagging a touch as US yields inch higher. Ahead, a handful of Fed speakers will be scrutinised for any deviation from the Powell line.

Top European News

• SNB’s Schlegel says a temporary increase in inflation via rent is possible.
• China’s Vice Premier says they are willing to work with the EU to deepen practical cooperation in promoting industrial transformation and upgrades, via State Media; to jointly safeguard supply chain stability.
• Portugal’s president dissolves parliament and calls snap elections, according to dpa. Portugal is to hold an election on March 10, 2024 according to AFR.
• Peru Central Bank cuts reference rate by 25bps to 7.00%, as expected.

FX

• Buck back on a recovery track as Fed Chair Powell underscores lack of confidence about current policy being restrictive enough, DXY edges closer to 106.00 from sub-105.00 w-t-d low.
• Euro and Yen defend semi-psychological 1.0650 and 151.50 marks vs Dollar, Pound keeps afloat of 1.2200 against Greenback post-better than forecast UK GDP metrics.
• Franc pares losses towards 0.9000 as SNB Schlegel highlights the prospect of a blip in inflation on rents, Norwegian Krona rejuvenated by hotter than consensus CPI, core especially.
• PBoC sets USD/CNY mid-point at 7.1771 vs exp. 7. 2963 (prev. 7.1772)

Fixed Income

• Bonds on the brink of a complete round trip from weekly peak to trough after hawkish-leaning Fed soundbites and poor US 30 year auction.
• Bunds, Gilts and T-note all nearer bases of 129.45-130.13, 94.70-95.32 and 107-10+/23 respective ranges.
• BTPs sub-112.00 and digesting Italy’s multi tranche mid-month issuance

Commodities

• A very similar story to Thursday for the crude benchmarks, which are attempting to reclaim the modest ground they gained in the first half of that session before broader sentiment was hit by a poor US auction and Chair Powell.
• WTI Dec’23 and Brent Jan’23 are at the upper-end of USD 75.31-76.49/bbl and USD 79.79-80.86/bbl respectively; however, this leaves the benchmarks around USD 5/bbl shy of their WTD bests and almost USD 20/bbl off the early-October YTD peaks.
• Metals feature contained performance for spot gold, but with a slight negative bias as it eases back towards the WTD trough while base metals are pressured alongside the broader risk tone; XAU is back within relative proximity to the 200- and 100-DMAs of USD 1934/oz and USD 1927/oz respectively.
• Over 60 countries are reportedly backing a deal to triple renewable energy and shift away from coal, according to Reuters citing officials.

Geopolitics

• “The Israeli army announces the cessation of its airstrikes in the Gaza Strip to mitigate civilian casualties”, according to Sky News Arabia.
• Israeli military said it struck a position in Syria in response to Thursday’s drone attack in Eilat, according to Reuters.
• Iranian Foreign Minister said expanding the scope of war has become inevitable with the increase in escalation in Gaza, according to Sky News Arabia.
• China’s Ambassador to the US Feng says US-China relations are still facing severe challenges, and there is still a long way to go to stabilise and improve relations, according to Reuters.
• China Coast Guard, on the Philippines’ resupply mission on Nov 10th, urged the Philippines to immediately stop infringing on China’s sovereignty; Followed the Philippines’ resupply vessels and took control measures, according to Reuters.
• Hungarian PM Orban says the EU must not begin membership discussions with Ukraine, via State Radio.

Market Snapshot

• 10:00: Nov. U. of Mich. Current Conditions, est. 70.3, prior 70.6
  • Nov. U. of Mich. Sentiment, est. 63.8, prior 63.8
  • Nov. U. of Mich. Expectations, est. 61.0, prior 59.3
  • Nov. U. of Mich. 5-10 Yr Inflation, est. 3.0%, prior 3.0%
  • Nov. U. of Mich. 1 Yr Inflation, est. 4.0%, prior 4.2%

DB’s Jim Reid concludes the overnight wrap

As we hit the end of another week my 6-yr old twin boys have been asked to play in an under 8s tennis tournament tomorrow. They play a lot on our patio and the longest rally I’ve ever seen (with their bikes as a net) is 3 shots. So unless they go for immediate winners down the line I’m not optimistic of success. Their current football record is one draw and eight losses against other teams so I feel I’m preparing them for life.

Generally this week it’s been a series of winners for a 60/40 portfolio but that came to a shuddering halt last night. Indeed on Tuesday we paraphrased the famous “just as you thought it was safe to buy bonds” line from the Jaws movie. That was a false alarm as longer bonds rallied back again through last week’s yield lows in Asia yesterday morning. However, the sharks have fought back with a vengeance via a bond sell-off that was made worse by a very poor 30yr auction and what was interpreted to be a hawkish Powell speech an hour later at 7pm London time. In short, both 10yr (+13.2bps) and 30yr yields (+15.1bps) saw their largest increases in four weeks, which in turn dragged the S&P 500 (-0.81%) to its first decline in 9 sessions .

While the 3yr and 10yr auctions the previous two days were well digested, the $24bn 30yr auction last night priced at 4.769%, 5.3bps above the indicated pre-sale level. Only one other 30yr auction in the last decade has had a tail around these levels. The bid-cover ratio (at 2.24) and the size of end-investor take up (at 75% vs 82% last month) were at their weakest since late 2021. 10yr and 30yr Treasury yields had already been trading c. 7bps and 11bps higher on the day but roughly doubled that move immediately after the auction (spiking by 9bps and 11bps, respectively). The 30yr yield saw a decent reversal later on but still closed +15.1bps higher on the day. On the other hand, the 10yr largely maintained its move, up +13.2bps to 4.63%, helped by some relatively hawkish comments from Powell an hour later. In Asia this morning, 10 and 30yr yields are around -1.5bps lower.

In remarks at an IMF conference, Fed Chair Powell said that “if it becomes appropriate to tighten policy further, we will not hesitate to do so” and echoed an earlier line that ”we are not confident that we have achieved such a stance” that would ensure inflation returns to 2%. There was some balance within his comments — alluding to two-sided risks and the role that improved supply has played in bringing down inflation – but adding that “going forward, it may be that a greater share of the progress in reducing inflation will have to come from tight monetary policy”. So hawkish comments overall, especially when other Fed speakers had struck a more dovish note earlier in the day. For instance, Atlanta Fed President Bostic said that “I think our policy is restrictive, and likely sufficiently restrictive”. Meanwhile, Richmond Fed President Barkin said that “we are still not seeing the full effects of policy”, and that “I believe there’s a slowdown coming”.

Powell’s comments had a larger impact on the front-end. The likelihood of another rate hike priced by Fed funds futures went up from 17% to 24% on the day, with end-24 pricing up +10.3bps to 4.56%. The 2yr yield was trading +2 to 3bps higher on the day prior to Powell’s speech, but was up +8.7bps to 5.02% at the end, the first time since the end of October that it has closed above 5%.

The moves in yields were also interesting given that there were fresh signs of the labour market softening. That came from the weekly jobless claims data, where continuing claims rose to their highest level since April over the week ending October 28, at 1.834m (vs. 1.820m expected). The initial claims were broadly as expected at 217k over the week ending November 4 (vs. 218k expected) but this still pushed the 4-week average up for a third week running. Our US economists did note in a recent report (here) that the current rise in continuing claims may be exaggerated due to excess seasonality. But even keeping this caveat in mind, their rise in the past 5 weeks (+162k) has outpaced that seen in the same period last year (+137k). So adding to the evidence from last week’s jobs report that several labour market indicators are now steadily weakening.

The spike in yields in the latter part of the US session weighed on what had been a mixed day for equities. The S&P 500 had been on course to narrowly eke out a historic 9th consecutive gain before the 30yr auction, but then fell sharply to close -0.81% lower. The losses were broad-based with the NASDAQ (-0.94%) and Dow Jones (-0.65%) seeing similar declines. The small cap Russell 2000 underperformed (-1.57%), falling for the 4th day in a row. Its -4.17% decline so far this week puts it on course for the worst weekly performance since March.

One of the outperforming assets on the day was cryptocurrencies. Bitcoin (+3.74% to $36,638) rallied to its highest level since 5 May 2022 – just before the collapse of the Terra stablecoin which then prompted a chain of stresses in the crypto space.

Back in Europe, equities outperformed their US counterparts but closed before the late slump, with the STOXX 600 advancing +0.84% on the day, with similar gains for the DAX (+0.81%) and the CAC 40 (+1.13%). Meanwhile, European bonds had seen a more modest rise in yields for the day prior to the US 30yr auction, as those on 10yr bunds (+3.1bps), OATs (+2.8bps) and BTPs (+3.3bps) all moved higher .

In Asia, the Hang Seng (-1.59%) is the biggest underperformer so far while the CSI and the Shanghai Composite are easing -0.69% and -0.45%, respectively, as concerns about the health of the world’s second-biggest economy resurfaced as China’s deflationary pressures worsened in October. Elsewhere, the KOSPI (-0.96%) and the Nikkei (-0.72%) are also losing ground in early trade. S&P 500 (+0.08%) and NASDAQ 100 (-0.02%) futures are fairly flat.

Early morning data showed that New Zealand’s manufacturing sector activity remained in contraction for the eight consecutive month as the NZ manufacturing index dropped to 42.5 in October from 45.1, notching its biggest contraction since August 2021.

Looking back at yesterday’s other data, it was a quiet day in Europe, with the one release of note being Q3 wage growth in France. This came in at +0.5% quarter-on-quarter (+1.0% prev.), marking the slowest quarterly wage growth in two years. While this data can be noisy for an individual quarter, it adds to other evidence of a slowing labour market in the euro area.

To the day ahead now, and data releases include UK GDP for Q3, Italian industrial production for September, and the University of Michigan’s preliminary consumer sentiment index for November. Otherwise, central bank speakers include ECB President Lagarde, Bundesbank President Nagel, and the Fed’s Logan and Bostic.

Shares of Plug Power, a company specializing in hydrogen and fuel-cell energy, plummeted by 30% in premarket trading in New York. This steep decline followed the company’s third-quarter earnings report on Thursday evening, which cited “unprecedented supply challenges in the hydrogen network in North America.”

Plug Power reported third-quarter losses of $283.5 million, equivalent to 47 cents per share, widening from a loss of $170.8 million, or 30 cents per share, in the same quarter one year ago. The company’s revenue increased to $199 million from $189 million a year earlier and slightly missed the Bloomberg Consensus estimate of $200.2 million. 

Here’s a snapshot of the quarter:

• Net revenue $198.7 million, +5.3% y/y, estimate $200.2 million (Bloomberg Consensus)
• Sales of fuel cell systems, related infrastructure and equipment $145.1 million, -8.1% y/y, estimate $172.6 million
• Sales from services performed on fuel cell systems and related infrastructure $9.29 million, +11% y/y, estimate $10.2 million
• Sales from power purchase agreements $20.1 million vs. $9.52 million y/y, estimate $14.7 million
• Sales from fuel delivered to customers and related equipment $19.4 million, +56% y/y, estimate $19 million
•  Other revenue $4.85 million vs. $0.32 million y/y, estimate $0.56 million
• Loss per share 47c vs. loss/shr 30c y/y, estimate loss/shr 30c
• Gross margin -69%, estimate -15.1%
• Cash and cash equivalents $110.8 million, -94% y/y, estimate $523.1 million

In a shock, Plug Power said this year’s performance “has been negatively impacted by unprecedented supply challenges in the hydrogen network in North America.” It blamed a “severe hydrogen shortage” that has “negatively affected direct cost of service as well as the timing for implementation of fleet upgrades into customer operated equipment.” And said the negative impacts were compounded by “inflation.” 

“We believe this hydrogen supply challenge is a transitory issue, especially as we expect our Georgia and Tennessee facilities to produce at full capacity by year-end,” it added.

While supply chain snarls are one thing for Plug Power, the company warned existing cash and available-for-securities and equity securities will not be sufficient to fund operations over the next 12 months. It added, “These conditions and events raise substantial doubt about the company’s ability to continue as a going concern.” 

RBC Capital Markets analyst Chris Dendrinos estimates Plug Power would need more than $750 million to boost liquidity over the next 12 months. 

“[Plug] management expressed confidence in executing a liquidity transaction near-term and continues to see a path for margin improvement through next year. However, at this time we think it prudent to move to the sidelines and await execution of these events,” Dendrinos wrote in a note.

KeyBanc analyst Sangita Jain warned a potential $1.5 billion loan from the Department of Energy to relieve short-term liquidity concerns might need to be approved more quickly. 

Besides a meltdown in the hydrogen space, we have provided readers with the understanding that President Biden’s renewable space is in a full-blown crash. Inflation, high-interest rates, and waning demand have sent wind and solar stocks tumbling in recent weeks. 

Perhaps it’s time for the Biden administration to issue ‘green’ bailouts. 

Authored by Mike Shedlock via MishTalk.com,

Mario Draghi, former ECB head, delivers a near certain recession outlook. A current ECB governor sees stagflation. However, an agonizing death of the Eurozone is the real story.

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Draghi Says Euro-Zone Recession Almost Sure to Happen

Bloomberg reports Draghi Says Euro-Zone Recession Almost Sure to Happen

The euro zone is nearly certain to experience a recession by the end of 2023, former European Central Bank President Mario Draghi said, according to the Financial Times.

Speaking on Wednesday to a conference in Brussels organized by the newspaper, he said the slump probably won’t be “deep” or “destabilizing.”

“It is almost sure we are going to have a recession by the year-end,” the FT cited the ex-central banker and former prime minister of Italy as saying. “It is quite clear the first two quarters of next year will show that.”

Belgian Governor Pierre Wunsch, speaking earlier in Brussels, acknowledged the impact of tighter monetary policy and said that growth risks are “tilted to the downside.” The euro zone is “entering some weak form of stagflation,” he added.

Mario Draghi says: “It is almost sure we are going to have a recession by the year-end [in the EU]”; and: “Either Europe acts together and becomes a deeper union… or I am afraid the European Union will not survive other than being a single market.” pic.twitter.com/zO1wWdyyPy

— Philipp Heimberger (@heimbergecon) November 9, 2023

Draghi Comments

• “Either Europe acts together and becomes a deeper union, a union capable of expressing a foreign policy and a defence policy, aside from all the economic policies . . . or I am afraid the European Union will not survive other than being a single market.”

• “The European economy has been losing competitiveness in the last 20-plus years, with respect not just to the United States but Japan, South Korea and, of course, China.”

• “In many, many technological areas, technological fields, we have lost presence, we have lost footprint.”

Draghi Presses for a Fiscal Union

Mario Draghi, is a former ECB head, former head of the Bank of Italy, and former technocrat (unelected) Italian Prime Minister.

I expect his recession comments will be repeated 100 times if not more by mainstream media. But his comments on a fiscal union is the real story here, not recession.

Draghi avoided the term fiscal union but he seeks a bailout of Southern Europe generally and Italy specifically. As ECB head, he pushed hard in monetary union direction and failed.

I have been commenting on this since 2004 or so.

The Euro is Fatally Flawed

The euro itself is fatally flawed because there is not a single interest rate that makes any sense for Germany, Greece, Italy, France, and Spain, let alone 19 countries.

It take a unanimous vote to change anything not specifically allowed by the Maastricht Treaty.

At the outset, France was allowed to force its agricultural policy on all the other nations to protect the family farm. Also at the outset, Germany demanded no fiscal union.

Every year, global trade policy fails due to France. And when Greece nearly blew up on Draghi’s watch, the EMU would neither let Greece sink nor bail it out.

Italy has needed bank reform and productivity reform for decades, but even while president Draghi made almost no progress on either front.

Single Market a Failure Too

The single market (EU) is a failure as well. There are 28 countries in the EU and to change anything important is nearly impossible.

It took decades to make a simple trade agreement with Canada, because a couple of tiny EU nations demanded changes that Canada would not accept.

Nannycrat Rules

The EU is governed collectively by a bunch of nannycrats who in the name of competitiveness, would break up every company before it even got started.

Google, Microsoft, Amazon, Facebook, and Nvidia could not exist in the EU because nannycrats would break them apart before they ever got big.

The US has the strongest, most free capital markets in the world. Chinese corporations get state support to aid exports.

In contrast, the EU has nannycrats who insist on fairness with no clear idea of what fair is.

Draghi laments ““In many, many technological areas, technological fields, we have lost presence, we have lost footprint.”

Indeed, and I just explained why.

Looking Backward, Not Ahead

Germany looks backward still attempting to protect its lead in diesel technology and analog phones. German infrastructure is pathetic due to lack of investment.

The EU is far behind the US and China on Artificial Intelligence (AI). The EU is guaranteed to drop further and further behind because instead of attempting to catch up, the EU seeks more regulation to stop everyone else.

Military and Foreign Policy

Draghi wants a” union capable of expressing a foreign policy and a defence policy, aside from all the economic policies.”

What a hoot. A single country can block any foreign policy action. Hungary and Poland both have done so, the former on Russia multiple times.

It’s as if Illinois could block whatever the President of the US wanted to do.

It is preposterous to moan about foreign policy and hint at an EU army when the EU cannot even get its act together on agricultural policy.

EU Won’t Fail, It Has Failed

Draghi laments “I am afraid the European Union will not survive other than being a single market.”

Already, the EU is nothing more than a “single market” led by dysfunctional nannycrats with endless regulatory madness and too little free market capitalism.

The EU fights over border policy, AI, G5, agriculture, trade, an EU army, and literally everything. One might say the same about the US, but it only takes a majority to change things in the US, not 50 of 50 (28 of 28 in the EU).

The EU won’t fail because it already has failed. But the cancerous death has been slow and agonizing. EU and EMU Rules make that impossible to change too.

Mish Flashbacks

• September 10, 2012: Why Bond Buying Undermines Democracy; Is Draghi Above The Law?

• April 11, 2013: Eurozone Math; One Size Fits Germany; Door Number Two

• February 28, 2014: Stiglitz: Leaving the Euro Painful but Staying in More Painful‘

• August 31, 2014: Eurozone Currency Dispute Intensifies: France Wants More ECB Action to Correct Overvalued Euro, Germany Doesn’t

• October 20, 2014: Eurozone Rotting to the Core; Four Possibilities; Beyond the Math

• January 13, 2015: Steen Jakobsen Warns “Euro is Not a Good Idea and ECB About to Make Biggest Mistake in History”

• March 10, 2015: From ZIRP to NIRP: Virtues of Germany vs. the Vices of Greece; What About “Speece” and Gold?

• September 3, 2015: Meet “Buzz” Draghi: To Infinity and Beyond

• December 6, 2017: An Italian Regulator’s Risk-Sharing Plan to “Cure the Eurozone”

• May 21, 2018: Italy’s New Prime Minister Puppet: Time to “Ringfence” Italy? MMT to the Rescue?

• August 24, 2018: Italy-EU Migration Feud EU Boils Over With Italian Threats: Schengen at Risk

• June 30, 2020: What Would It Take to Dethrone the Dollar?

• April 23, 2021: Who Benefitted from the Euro and Who Pays the Piper Now?

• July 12, 2021: Eurozone Debt Imbalances Aren’t Sustainable Yet They’re Unfixable Due to Germany’s Constitution”

• January 30, 2022: The Battle for Europe Integration Has Failed and Russia Provides Proof

• July 8, 2023: The Green Deal in the EU Goes Unfunded, Expect a Total Collapse

Spotlight on Four Possibilities Noted in October 2014

1. Somewhere along the line, Greece, Italy, or France, is going to have enough of recession and stagnation and leave the euro in a disorderly eurozone breakup.

2. Germany and the Northern European states need to bail out the rest of Europe.

3. Germany can leave the eurozone in an orderly eurozone breakup.

4. Decades of stagnation if the nannycrats succeed in keeping the eurozone intact.

Option two sounds nice but is fatally flawed. Germany would never agree to bailouts of that nature, and constitutionally couldn’t if it wanted to. Besides, Italy and France are too big. Regardless of how unpalatable, there are no other options.

And a decade later, we are in exactly the same place, but with increased tensions, more loss competitiveness, more border issues, and a euro that has plunged vs the dollar.

I repeat, the EU won’t fail because it already has failed. But the cancerous death has been slow and agonizing.

Cancer will eventually consume the patient. Unfortunately, the slow agonizing death may still be decades away.

Authored by RFE/RL staff via OilPrice.com,

• The European Commission is finalizing its enlargement report, potentially recommending Ukraine and Moldova for EU accession talks.

• Turkey has progressed towards ratifying Sweden’s NATO membership with Erdogan’s bill in the Turkish parliament, but Hungary’s decision remains pending.

• The EU’s decision on Georgia’s candidacy and Bosnia’s accession talks, as well as Sweden’s NATO membership, will have significant geopolitical ramifications.

The European Commission’s long-awaited annual enlargement report is set to be released on November 8. The release has been constantly postponed, as the report was originally expected to come out in early October.

The delay was due to a number of factors.

Firstly, there was a wish from EU member states that the enlargement report wouldn’t be released ahead of the EU summit in Brussels on October 26-27, with fears that it could “hijack” discussions on other issues such as the bloc’s budget and migration.

Secondly, the enlargement report is huge, with assessments on 10 countries — Albania, Bosnia-Herzegovina, Georgia, Kosovo, Moldova, Montenegro, North Macedonia, Serbia, Turkey, and Ukraine.

There is a lot of ground to cover and EU member states — the ultimate arbiters in the enlargement process — have to study the documents before making a decision.

Member states will vote on the enlargement questions at the EU’s General Affairs Council, which brings together the bloc’s foreign ministers, in Brussels on December 12.

A potential decision will then need to be rubber-stamped at the EU summit in Brussels two days later.

Finally, the enlargement report has been delayed partly because the European Commission has been generous with the time it has allowed several countries to fulfill certain conditions and reforms that Brussels has set for the EU hopefuls.

Deep Background: 

According to various media reports, the European Commission will recommend the opening of accession talks with Ukraine and Moldova.

An EU source familiar with the enlargement report who could only speak on the condition of anonymity told me that European Commission President Ursula von der Leyen wouldn’t have traveled to Kyiv on November 4 if there hadn’t been “positive signals” from Ukraine.

Regarding Ukraine and Moldova, it’s important to note the conditions and timelines — and how those requirements and targets might be referred to in the reports.

Moldova and Ukraine have not yet fulfilled all the priorities set out by the EU in the summer of 2022. That could mean some sort of diplomatic fudge.

While EU member states might decide to open accession talks with Ukraine and Moldova in December, the actual opening of talks — which involves the “screening” of all the EU legislation that countries need to adopt to become members — will take place in early 2024. And all bets are off as to how long the whole process will take, as accession talks can sometimes drag on for years.

Drilling Down

• The most difficult decisions for the European Commission will be whether Georgia gets EU candidate status and whether Bosnia will be given the green light to start accession talks. These decisions are likely to go to the wire: first on November 6, when the heads of cabinet of the 27 EU countries meet to dissect the enlargement report; and then, on November 8, when European commissioners meet to smooth out any final wrinkles.

• It’s also possible that the European Commission’s report will not give any clear recommendations. That would make sense in one crucial way: In the end, it isn’t the European Commission that decides on candidate status or the opening of accession talks but rather the 27 member states via unanimity.

• There has also been a precedent of members states rejecting the European Commission’s recommendations. In 2009, the commission recommended that North Macedonia (then just Macedonia) start EU accession talks. And despite the commission recommending the same every year, EU member states didn’t give North Macedonia a green light for talks to start until 2020.

• For Georgia, there is still much uncertainty, with widespread concerns in Brussels and among EU member states about the country backsliding on democracy. Despite warnings from the EU, Georgian politics is still deeply polarized. The government has been criticized internationally for its attempt to pass a controversial “foreign agent” law and for the recent impeachment of the country’s president for traveling to see EU leaders without government approval.

• My understanding is that, in the end, Georgia will get candidate status. EU diplomats familiar with the file have said there is plenty of momentum for enlargement within the bloc right now and, with European elections and a change of guard in the European Council and European Commission in 2024, there is a sense that Brussels wants to move the process along as quickly as it can for as many EU hopefuls as possible. There are also concerns about separating Georgia from Ukraine and Moldova. With the latter pair further down the enlargement road and likely to start accession talks soon, even if Georgia does get candidate status, the country will still be behind.

• For Bosnia, things are even more uncertain. It was already quite controversial that the country was granted candidate status last year, considering that it had barely fulfilled any of the 14 conditions that the European Commission laid out. Still, a handful of countries — notably Austria, Croatia, Hungary, and Slovenia — are pushing for accession talks to start with Bosnia, saying that there is a need for candidates from the east and from the Western Balkans to move in unison.

• Come December, this will inevitably result in a good deal of horse-trading among member states. Most countries are prepared to give the green light to start EU accession talks with Moldova and Ukraine, although Hungary still has concerns about how ethnic Hungarians are being treated in Ukraine. Budapest may try to bargain, only approving Kyiv’s bid if other countries sign off on Georgia — which has developed strong ties with Hungary — getting candidate status.

Will Sweden Finally Join NATO This Year?

What You Need To Know: 

Sweden took a big step closer to becoming NATO member No. 32 when Turkish President Recep Tayyip Erdogan submitted a bill on October 23 to the Turkish parliament approving the Nordic country’s membership of the military alliance. With his Justice and Development Party (AK) having a majority in the Turkish parliament, the bill is expected to pass in a few weeks’ time and will then be considered by the foreign affairs committee in the unicameral chamber.

The hope in Brussels is that Sweden will officially become a member of the bloc around the time of the NATO foreign ministers’ meeting in Brussels on November 28-29. But no one is daring to set any firm dates, given just how drawn out this process has become.

Most NATO officials expected both Finland and Sweden to join in the fall of 2022 after having applied for membership shortly after Russia’s full-scale invasion of Ukraine in February 2022. Apart from Turkey and Hungary, 28 out of 30 countries ratified the Nordic pair’s accession bids a year ago.

Ankara wanted to see progress — notably from Sweden — in fighting terrorism, lifting an arms embargo on Turkey, and fulfilling extradition requests, mainly Kurds accused by the Turkish state of terrorism.

While Sweden has approved legislation on the first two points, the multiple Koran burnings and Kurdish demonstrations in the country have killed any hopes of a quick Turkish ratification. (Finland “decoupled” its accession process from Sweden and joined NATO in April.)

At the NATO summit in Vilnius in July, there was some sort of deal between Turkey and Sweden that would supposedly pave the way for Turkish ratification. Ankara, however, was in no hurry to do it in July and waited until after the parliamentary summer recess ended in early October.

Deep Background:

According to several NATO officials I have spoken to, they expected Erdogan to send the bill to parliament in early October. Two events, however, prevented that: an October 1 suicide bombing in Ankara, which the separatist Kurdistan Workers Party (PKK) claimed responsibility for; and an incident a few days later, when U.S. forces shot down a Turkish drone in northern Syria.

With Erdogan winning the presidential election in May — partially on a platform of being tough on terrorism — the Turkish leader has had to tread carefully on green-lighting Sweden’s NATO bid. And there are certainly questions about how much Sweden has done to address Turkey’s concerns. Erdogan initially wanted several hundred people — mainly Kurds — extradited from Sweden, but last year only four were sent back to Turkey and there will likely be a similar number this year.

Drilling Down

• The other issue tied to Turkey’s ratification of Sweden joining NATO is the potential U.S. sale of F-16 fighter jets to Ankara in a deal worth $20 billion. The deal is still waiting for a green light from the U.S. Senate’s Committee on Foreign Relations and Turkey will be watching very closely.

• Regarding Sweden and NATO, Hungary is still a bit of an unknown quantity, with Budapest not yet ratifying the country’s accession bid. When Turkey said it was ready to ratify Finland joining NATO on March 17, Hungary quickly followed suit and Budapest has said that it won’t be the last country to approve Sweden’s accession. This now appears to have changed. When Hungarian opposition parties asked for a vote on Sweden in the wake of Erdogan’s October 23 announcement on ratification, the ruling Fidesz party, which holds a solid majority in parliament, refused to put it on the agenda.

• Hungarian Foreign Minister Peter Szijjarto recently said that the country’s lawmakers “will make a sovereign decision on this issue” regardless of what Turkey does. Earlier in the fall, Hungarian Prime Minister Viktor Orban noted that there was “little chance” that parliament would ratify Sweden’s accession in 2023.

• In recent years, Sweden has irked Hungary, notably with a TV report first aired in 2019 by the Swedish Educational Broadcasting Company. The 10-minute video, titled The EU And Democracy, is part of a series focusing on the European Union, which has also covered Brexit, lobbying, and asylum rights in the bloc. The episode on Hungary airs several interviews with critics of the current government, including members of the European Parliament, a political activist, Hungarian high school students, and a Swedish lecturer from Budapest’s Central European University, which now largely operates out of Vienna after political pressure from Fidesz.

• It’s still not clear what Hungary wants — in its response to the Swedish video and more broadly. Budapest has not officially demanded that the video be removed and the Swedish educational broadcaster is standing by it. It could be that Hungary is treading with care as it seeks Sweden’s approval of frozen EU funds going to Hungary by the end of the year — in exchange, of course, for Hungary’s nod to NATO on Sweden.

Looking Ahead

On October 8, the legality of EU sanctions against Russia will be tested as the Luxembourg-based European Court of Justice will hand down a ruling in the case of Dmitry Mazepin.

The Russian oligarch, who made a fortune in the chemical industry, was targeted with an asset freeze and a visa ban by the EU shortly after Russia’s attack on Ukraine in 2022.

Like many other Russian businessmen, Mazepin has challenged this decision in the European Court of Justice — even though only a few have won similar cases.

Members of the European Parliament are used to being addressed by famous political leaders but not by Academy Award-winning actors. On November 8, Cate Blanchett spoke to the full plenary on November 8.

The Australian Hollywood star, who is a UNHCR goodwill ambassador, has been vocal about helping refugees from Syria and is likely to touch upon the need to support those fleeing the ongoing war in the Middle East.