US stock futures, and the entire risk complex tumbled on Monday amid growing concerns that China’s economic reopening will not only be a disaster but will also be accompanied by violence following protests against Covid restrictions over the weekend. The entire risk complex was sharply lower, with S&P 500 futures down 0.7% as of 7:30 a.m. ET, trading just around 4,000 having dropped as much as 1% earlier, while Nasdaq 100 futures fell 0.9%. Crude crashed to $74, the lowest price since December 2021, while Asian stocks and the yuan plunged. Cryptos also slumped while the dollar and Treasuries ceded earlier gains that were fueled by investors’ dash to safety; the 10Y was last trading at 3.67%.  

Among individual movers in premarket trading, Apple fell as much as 1.3% following a report that the turmoil at a key Chinese factory could lead to a production shortfall of close to 6 million iPhone Pro units this year. Cryptocurrency-exposed stocks declined, mirroring a fall in the price of Bitcoin. Bank stocks were also lower, putting them on track to snap a five-session winning streak. In corporate news, C.S. Venkatakrishnan, CEO at Barclays, has a form of lymphoma and will undergo treatment for several months. A survey of finance workers has found that some employees are ignoring return-to-work mandates, the latest sign of the challenges firms face in encouraging staff back to the office. Here are the other notable premarket movers:

• Chinese shares listed in the US declined in premarket trading, with major internet stocks bearing the brunt of a selloff triggered by nationwide protests against Beijing’s Covid Zero policies. Alibaba Group fell 1.5%, JD.com slipped 2%; shares of electric car makers Nio and Li Auto also declined.
• Talkspace shares surge 50% following a report in Israeli newspaper Calcalist that telehealth company American Well is in talks to buy the online therapy platform for ~$1.50 per share, representing a 150% premium to its last closing price.
• Univar shares jump 11% as analysts say that Brenntag’s plans to acquire its US rival raise questions about the size of any deal and potential implications for an equity raise by the German chemicals distributor.
• Cryptocurrency-exposed stocks decline, mirroring a fall in the price of Bitcoin, as worries over unrest in China and the country’s reopening weigh on risky assets. Coinbase -2.2%, Riot Blockchain -2.3%, Marathon Digital -2.2%
• Keep an eye on Macau-exposed gaming stocks like Wynn Resorts, Las Vegas Sands (LVS US), Melco Resorts (MLCO US) and MGM Resorts (MGM US) as Wynn Macau and MGM China climbed in Hong Kong, leading gains among six Macau casino operators that were awarded new licenses to continue running their businesses in the gambling hub.
• Beyond Meat drops 2.9% and Tyson falls 2.1% as both stocks were cut to underweight from equal-weight at Barclays. which says that the majority of protein companies are facing a difficult outlook.
• Activision Blizzard shares gained 1.3% after being upgraded to overweight from equal-weight at Wells Fargo. The video game developer is undervalued regardless of the outcome of the Microsoft merger deal, the broker says
• Watch shares in online retailers like Amazon.com, Etsy, Shopify, EBay as analysts say that promotions during the Black Friday weekend were higher than last year. The discounts prompt a focus on any impact to retailers’ margins, though some are hoping that the promotions will have been enough to lure in shoppers and help boost sales.
• Keep an eye on Williams-Sonoma shares as Morgan Stanley downgrades the home furnishings retailer to underweight from equal-weight, saying that earnings revisions could turn “sharply negative” in 2023.
• Watch Live Nation as its stock was raised to buy from neutral at Citi, with analyst Jason Bazinet saying the risk-reward on the ticket-selling platform is now “more reasonable.”

As reported last night, global investor sentiment was hammered after news of the worsening protests affecting cities including Shanghai and Beijing. The latest developments contrast with reports earlier this month that China was toning down its Covid Zero curbs, which had sparked a rally in equities. Modest customer traffic and heavy discounting by American retailers on Black Friday also added to the downbeat tone.

“This latest wave of China’s pandemic could disturb global supply chains again, as did the previous wave earlier this year — that could be inflationary,” analysts at Yardeni Research wrote in a note. “The recent stock market rally on hopes that the government will ease Covid restrictions is running out of steam.”

Coming off weekly gains amid bets that the Federal Reserve will scale back interest rate hikes, US stock indexes are looking to cap their second straight month of gains, paring this year’s selloff on concerns over tighter monetary policy and the possibility of a recession. Echoing Michael Wilson’s call, Deutsche Bank strategists said they also expect the bear market rally to continue into the first quarter of 2023, but that the risk of an economic contraction will hammer equities in the third quarter. Goldman strategists Christian Mueller-Glissmann and Cecilia Mariotti also said US stocks are in for a wild ride next year as they don’t yet reflect the possibility of a recession.

Oil tumbled to the lowest level since December as a wave of unrest in China punished risk assets and clouded the outlook for energy demand, adding to the stresses in an already-volatile global crude market

In Europe, the Stoxx 50 dropped 0.7%, the UK’s FTSE 100 outperforming peers, dropping 0.3%; Stoxx 600 lags, dropping 0.9%. Energy, real estate and retailers are the worst performing sectors. European energy stocks led declines in Stoxx 600 index on Monday as oil slid to the lowest level since December amid growing protests in China against Covid restrictions, with investors worrying about economic activity and demand for raw materials. The Stoxx Energy sub-index fell 1.8% as of 8:38 a.m. in London, though is still up almost 26% year to date. Here are the biggest European movers:

• Elior rises as much as 6.7% as Bryan Garnier says a deal where it increases its share capital in exchange for the control of Derichebourg’s multi-services division will boost the French catering company’s earnings-per-share numbers.
• AB-InBev shares rise as much as 4.5%, outperforming the Stoxx 600 Food, Beverage & Tobacco index (-0.3%), after JPMorgan downgraded the company to overweight.
• Jet2 Plc rises as much as 4.6% after Stifel raises its price target on expectations that the carrier will “keep delivering profitable market share gains, whatever the economic weather.”
• Leonardo advances in Milan, as much as 2.8%, after the companies said late on Friday that the Brazilian Army chose the Centauro II armored vehicle made by Iveco and Oto Melara as “top of the list” within a procurement process.
• Brenntag shares drop as much as 10.6%, the most intraday since November 2015, after analysts said that plans to acquire US rival Univar raise questions about the size of any deal and potential implications for an equity raise by the German chemicals distributor.
• Persimmon shares fall as much as 4.1% as UBS cuts the UK homebuilder to sell from neutral, saying the group is “losing its mojo.”
• Evotec drops as much as 3.8% after RBC cut its price target for the German pharmaceutical firm, citing the risk of the company missing its guidance for 2022 Ebitda.
• Aryzta shares fall as much as 3.3%. ZKB notes volume growth slowed somewhat more than expected even as the baker made a strong start to the new financial year as it performs well in the inflationary environment.
• The building materials sector will be a “stockpicker’s dream” in 2023, Exane BNP says in a note downgrading its ratings on Kingspan, Rockwool and Travis Perkins.

Earlier in the session, Asian stocks fell as growing protests in China over pandemic restrictions and an advance in the dollar hurt demand for risk assets. The MSCI Asia Pacific Index declined as much as 1.7% before paring losses by more than half. Gauges in Hong Kong briefly tumbled more than 4% as citizens in major Chinese cities took to the streets to express anger over Covid curbs, complicating the path to reopening.  Adding to pressures on regional shares, the dollar advanced earlier in the session amid worries about growth in the Chinese economy. Equity benchmarks in South Korea and Taiwan fell more than 1%, with the latter also hurt by the ruling party’s resounding defeat in island-wide local elections. 

“The government, in order to survive, must crack down on any protests,” and this creates a lot of uncertainty, emerging markets investor Mark Mobius told Bloomberg Television, referring to developments in China. But “you can’t go much lower than we already are — maybe a 5% or 10%” correction in China stocks is likely, he added. Gauges in China and Hong Kong pared losses during afternoon trading as some bets emerged that the social unrest may accelerate an exit from Covid Zero restrictions.  Monday’s declines trimmed the Asian stock benchmark’s November gain to about 12%, but it’s still poised for its best month since 2009. In terms of catalysts, traders are looking ahead to Federal Reserve Chair Jerome Powell’s speech Wednesday for clues about the central bank’s next policy decision.

Japanese equities also fell amid a broad selloff in the region as unrest in China damped investor sentiment. The Topix Index fell 0.7% to 2,004.31 as of market close Tokyo time, while the Nikkei declined 0.4% to 28,162.83. Toyota Motor Corp. contributed the most to the Topix Index decline, decreasing 1%. Out of 2,164 stocks in the index, 663 rose and 1,417 fell, while 84 were unchanged. “Protests against the Covid Zero policy have two sides,” said Shoji Hirakawa, chief global strategist at Tokai Tokyo Research Institute. “If the protests spread further it will be a negative factor, but if the policy changes, it will become a positive factor.”

Bucking the global trend, Indian stocks climbed to a new life-time high, with weaker crude oil prices and robust foreign purchases helping local shares to feature among top performers in major Asian markets. The S&P BSE Sensex advanced 0.3% to close at 62,504.80 in Mumbai, while the NSE Nifty 50 Index was higher by an equal measure. The Sensex gained for a fifth day, extending this year’s gains to more than 7% and overtaking a 6.6% jump in the Jakarta Stock Exchange Composite Index. The rally in local shares has come on the back of easing commodity prices, with Brent plunging almost 15% so far this month to its lowest since early January. Foreign investors have also turned buyers of Indian shares, purchasing local equities worth $3 billion so far in November. The surge of Indian stock indexes to new peaks is a function of multiple factors, such as resilient corporate earnings, robust tax collections and a dip in retail inflation, according to Pankaj Pandey, head of research at ICICIdirect. With a drop of about 20% in crude oil prices in the last fortnight, inflation could ease further going forward, said Pandey, who has a 12-month target of 20,000 for the Nifty index.

In FX, the Bloomberg Dollar Spot Index gave up an earlier gain as the yen rallied by more than 1% against the dollar to touch 137.50. The euro and the Swiss franc also outperformed the greenback, while Commodity currencies, led by the Australian dollar, were the worst Group-of-10 performers. 

In rates, Treasuries were narrowly mixed with the curve continuing to flatten, inverted by -80bp and pivoting around a little-changed 10-year yield, amid weakness in oil prices including YTD low for WTI crude futures. 10-year earlier declined as much as 5.9bp to lowest since Oct. 5 as WTI crude futures fell 3.5% on unrest in China; 5- and 3-year yields also declined to lowest levels since early October. Inverted 2s10s curve reached -81.1bp, a new cycle low; flattening trend has support from bigger-than-average index duration extension in month-end rebalancing. Most euro-zone 10-year yields are 3bp-8bp higher on the day. Italian government bonds underperformed bunds. European focus is on ECB speakers including President Christine Lagarde. Gilt curve bear-steepens with 2s10s narrowing 3.8bps. Bund and Treasury bear-flatten. Peripheral spreads are mixed to Germany; Italy widens, Spain widens and Portugal tightens.

In commodities, oil tumbled to the lowest level since December as a wave of unrest in China punished risk assets and clouded the outlook for energy demand, adding to the stresses in an already-volatile global crude market. WTI drifts 2.9% lower to trade near $74.05. Brent falls 3.1% near $81.06. Base metals are mixed; LME copper falls 0.3% while LME lead gains 0.6%. Spot gold rises roughly $6 to trade near $1,761/oz. BHP reached an accord with a union to avoid a strike at the Escondida mine in Chile. And W&T Offshore Inc. is among the most active resources stocks in premarket trading, falling 4%. Crude futures decline. Here’s a look at the news that may drive trading in North American resources stocks today:

• West Texas Intermediate sank toward $74 a barrel following three weeks of losses, while Brent traded around $81. Protests over harsh anti-virus curbs erupted across the world’s largest crude importer over the weekend, including demonstrations in Beijing and Shanghai, spurring a broad sell-off in commodities as the week opened.
• Commodities tumbled as China’s Covid outbreak worsened and a series of stunning street protests in cities across the nation threaten to derail economic activity and sap demand for energy, food and raw materials.
• At least $25.7 billion of clean-energy factories are in the works, and the jobs they generate are winning over more Americans to solar, batteries and EVs.
• Gold rose, erasing earlier declines, as traders weigh growing unrest in China over Covid restrictions and await key US economic data for its bearing on Federal Reserve policy.

Looking at today’s calendar, it is a relatively quiet day with just the Dallas Fed manufacturing survey on deck.

Market Wrap

• S&P 500 futures down 0.7% to 4,004.75
• MXAP down 0.6% to 153.18
• MXAPJ down 1.1% to 488.71
• Nikkei down 0.4% to 28,162.83
• Topix down 0.7% to 2,004.31
• Hang Seng Index down 1.6% to 17,297.94
• Shanghai Composite down 0.7% to 3,078.55
• Sensex up 0.4% to 62,571.65
• Australia S&P/ASX 200 down 0.4% to 7,229.14
• Kospi down 1.2% to 2,408.27
• STOXX Europe 600 down 0.8% to 437.11
• German 10Y yield little changed at 1.97%
• Euro up 0.5% to $1.0450
• Brent Futures down 2.9% to $81.23/bbl
• Gold spot up 0.4% to $1,761.51
• U.S. Dollar Index down 0.32% to 105.62

Top Asian News

• Chair Jerome Powell is expected to this week cement expectations that the Federal Reserve will slow its pace of interest-rates increases next month, while reminding Americans that its fight against inflation will run into 2023
• A sense of chaos and uncertainty swept through Chinese markets on Monday as growing protests against Covid curbs and a record number of infections complicated the nation’s path to reopening
• The protests that erupted against China’s Covid Zero strategy represent one of the most significant challenges to Communist Party rule since the Tiananmen crisis more than 30 years ago. How Xi Jinping responds to it may end up being just as pivotal for the country’s future
• Australia has a stronger probability of bringing its economy in for a “soft landing” than almost any other developed- world counterpart, Reserve Bank Governor Philip Lowe said, citing the nation’s still-contained wage growth
• ECB Governing Council member Klaas Knot said risks to the outlook for consumer prices are still skewed to the upside, despite the euro area facing a recession
• Egypt’s newly flexible currency is still too tame for a market that’s bracing for more disruption ahead
• The Bank of Japan should conduct a review of policy under a new leadership from next year to make it more flexible, according to former board member Sayuri Shirai, who has been floated as a possible candidate for deputy governor

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mostly lower with risk appetite sapped by the ongoing COVID-related issues in China where a fresh record number of daily infections were reported and with public unrest brewing after hundreds of people protested throughout the weekend in several major cities including Beijing and Shanghai. ASX 200 was lower with energy leading the declines after oil prices slumped to YTD lows and with sentiment also mired by the surprise contraction in Australian Retail Sales. Nikkei 225 trickled closer towards the 28,000 level with some utility names hit after reports that Japan’s FTC will issue a record fine on three regional power companies for antitrust violations. Hang Seng and Shanghai Comp were pressured as the PBoC’s recent 25bps RRR cut was overshadowed by the COVID situation in China and with tech also hit after US FCC banned equipment authorisations for Chinese telecommunications and video surveillance equipment deemed to pose a threat to national security, although casino names outperformed after Macau renewed the licences of the six existing operators.

Top Asian News

• Hundreds of demonstrators conducted protests in cities including Beijing and Shanghai to express their discontent against China’s strict COVID measures, while the protests have so far lasted for 3 days, according to BBC and Reuters.
• China’s Shenzhen announced to limit restaurants and other indoor venues to 50% occupancy and said new arrivals to the city will be barred from entering venues such as theatres and gyms for the first 3 days as part of COVID measures, while it also asked the public to work from home, according to Reuters.
• Goldman Sachs said China could end its zero-COVID policy before April and earlier than widely expected with some chance of a “disorderly” exit, although it still sees a Q2 exit from zero-COVID as most likely with around a 60% chance.
• Beijing has vowed to curb rapid increase in COVID cases, according to an official; Guangzhou is to resume public transportation in locked down areas, according to an official.
• China is set to ease rules on developer bond state guarantees, according to Bloomberg.
• US FCC banned equipment authorisations for Chinese telecommunications and video surveillance equipment deemed to pose a threat to national security, while the list of companies deemed to pose a threat includes Huawei, ZTE (763 HK) and Hytera Communications (002583 CH), according to Reuters.
• US Space Force chief said the rapid progress of China’s military capabilities poses a growing risks to US superiority in outer space, according to Sky News Arabia and Reuters.
• Taiwan’s ruling DPP conceded defeat in the key Taipei mayoral election and Taiwanese President Tsai resigned as chairwoman of the ruling party following poor local election results but rejected an offer from Premier Su Tseng-chang to resign. Furthermore, the Chinese government said that the local Taiwan elections showed the mainstream opinion on the island is for peace, stability and a good life, while it will keep working with Taiwan’s people to promote peaceful relations and firmly oppose Taiwan independence, according to Reuters.
• South Korean Transport Ministry is to meet with the striking truckers’ union on Monday, according to an official cited by Reuters.

Cash bourses in Europe hold the downside bias seen across APAC stocks overnight which emanated from China reporting a record increase in COVID cases, whilst social unrest in the country made the headlines over the weekend; Euro Stoxx 50 -0.7%. European sectors are in a sea of red and portraying no overarching bias, although some of the defensive sectors are slightly more cushioned than most peers. In early European hours, the ES (-0.9%) gave up the 4,000 level while slight underperformance is present in the tech-laden NQ (-1.0%), as participants look for month-end flows ahead of the US jobs report at the end of the week. Apple (AAPL) is poised to lose 6mln iPhone Pros from the unrest at its Chinese plant, according to Bloomberg. Shipments of smartphones within China declined 4.6% Y/Y to 19.84mln handsets in Sept, according to CAICT.

Top European News

• UK PM Sunak is facing a rebellion from the ruling Conservative party as they seek to force the government to drop the ban on new onshore windfarms, according to Bloomberg.
• UK housing market stalled in October with house price growth slowing to its lowest quarterly level since February 2020 amid a disastrous mini-budget and the cost of living crisis, according to Reuters citing data from Zoopla.
• All EU market participant will have to hold “active accounts” at EU clearing houses for “systemically important” financial products, via Reuters citing an EU draft document.
• ECB’s Knot says underlying inflation trends are worrisome, risks to the inflation forecast are entirely tilted to the upside.
• ECB’s Kazimir says there is a growing risk of a recession in the Eurozone, hikes will continue despite unfavourable economic developments.

FX

• Dollar downed as risk aversion favours Yen and others, while month end rebalancing models signal broad selling requirement, DXY under 200 DMA and 105.500, USD/JPY eyeing 137.50
• Euro through near term resistance vs Buck around 1.0450 and 100 DMA against the Pound on RHS flow for Wednesday
• Aussie underperforms after weaker than forecast final retail sales and in sympathy with the Yuan on more Chinese CVOID contagion; AUD/USD heavy on 0.6700 handle, USD/CNH probes 7.2500 before pullback
• Loonie and Nokkie undermined by collapse in crude prices, as USD/CAD rebounds through 1.3400 and EUR/NOK beyond 10.3500
• PBoC set USD/CNY mid-point at 7.1617 vs exp. 7.1695 (prev. 7.1339)

Fixed Income

• Haven bid in bonds fades as Bunds retreat over 100 ticks from 141.42 Eurex peak, Gilts towards 107.00 after matching last Friday’s 107.66 high and T-note between 113-17/113-02+ parameters.
• BTPs underperform within wide 120.26-118.87 extremes on domemstic supply grounds.

Commodities

• WTI and Brent Jan futures have been under pressure since the reopening of futures trading, with Brent beneath USD 82/bbl for the first time since January (80.61-83.93/bbl daily range) and WTI printing a YTD low (73.60-76.49/bbl range) after Chinese daily COVID infections rose by a fresh record
• Spot gold has been gaining in tandem with the losses in the US Dollar with the yellow metal gaining above USD 1,750/oz but still under November’s high of around USD 1,786/oz.
• Base metals are mixed, with the initial China-induced downside overnight somewhat trimmed/cancelled out by a slide in the USD, with 3M LME copper trading on either side of USD 8,000/t.
• US Treasury Department is to issue a licence to allow Chevron to import Venezuelan crude oil to the US, while the licences will allow Chevron to take part in oil activities in Venezuela that were previously banned by the US and also permit them to send products to Venezuela needed to refine heavy crude into exportable grades. Furthermore, the licence is time-limited to 6 months and can be revoked if President Maduro does not negotiate in good faith or follow through on commitments, according to Reuters.
• Iraq’s SOMO said the OPEC+ cut decision in October didn’t decrease Iraq’s crude exports and the decision to cut helps maintain market stability. Iraq also stated that it produces 11% of total OPEC+ output and noted that the upcoming meeting will take into account current market conditions, while it sees oil prices to range USD 85-95/bbl next year, according to Reuters. It was also reported that Iraq’s OPEC representative said the country will increase oil capacity by 150k-250k BPD by 2023 and that Iraq will add 1mln-1.5mln BPD of oil export capacity by 2025.
• Kuwait’s KPIC shipped the first shipment of aviation jet fuel from the Al Zour refinery to UAE and Oman.
• BP’s (BP/ LN) Rotterdam refinery is resuming some operations after being idle for a week amid a pay dispute with workers, according to Reuters.
• Norway’s Gassco decreased the unplanned gas outage impact at fields delivering into Segal which was revised to a decline of 12.0 MCM/day from a decline of 14.9 MCM/day, according to Reuters.
• UAE’s ADNOC is reportedly to cut 5% of December’s crude oil supply to some term-lifters in Asia, citing the operational tolerance clause, via Reuters citing sources; but, will provide full contractual volumes for January.

Geopolitics

• Russian Defence Ministry said nine Russian prisoners of war were released as part of a prisoner exchange with Ukraine on Saturday, according to Reuters citing Russian news agencies.
• Energoatom President said there have been signs in recent weeks that Russians may be preparing to leave the Zaporizhzhia nuclear power plant, according to Pravda.
• UK military intelligence said Russia is likely removing nuclear warheads from ageing nuclear cruise missiles and firing unarmed munitions at Ukraine which highlights a depletion in its stock of missiles, according to Reuters.
• UK PM Sunak said Britain will stand with Ukraine for as long as needed and will maintain or increase military aid to Ukraine next year, while he also stated that Britain needs to stand up to competitors ‘not with grand rhetoric but with robust pragmatism’, according to Reuters.
• Senior Ukrainian government sources inform Mapl+ that Moscow is “ready to withdraw some heavy equipment such as tanks and artillery”, according to Mail’s Franey. In the context of the Zaporizhzhia plant
• North Korean leader Kim ordered to promote officials and scientists responsible for nuclear forces and said that building the nuclear force is the most important cause, while their ultimate goal is to possess the world’s most powerful strategic force. Kim added that recent ICBM launches demonstrated their firm resolution and decisive ability to build the world’s strongest army, while its new ICBM clearly proved that North Korea is a full-fledged nuclear power and can withstand the supremacy of the US. Furthermore, Kim said scientists have made a ‘wonderful leap forward’ in technology for mounting nuclear warheads on ballistic missiles and should continue to expand and strengthen the nuclear deterrent at an extraordinary pace, according to KCNA.

US Event Calendar

• 10:30: Nov. Dallas Fed Manf. Activity, est. -22.0, prior -19.4

Central Banks

• 12:00: Fed’s Williams Speaks to the Economic Club of New York
• 12:00: Fed’s Bullard Takes Part in MarketWatch Live Event

DB’s Jim Reid concludes the overnight wrap

As we start a new week that will introduce us to December, the big story over the weekend has been the unrest in China around the handling of Covid restrictions with multiple protests and demonstrations reported across the country on mainstream and social media. This seems to be the most serious of President Xi’s decade long tenure. In terms of Covid-19 cases, the ongoing outbreak remains elevated as the nation reported a record high of 40,052 local cases on Sunday up from 39,506 a day earlier.

The story is dominating Asian markets this morning. As I type, the Hang Seng (1.98%) is leading losses with the CSI (-1.58%) and the Shanghai Composite (1.03%) also sliding. Elsewhere, the KOSPI (-0.95%) and the Nikkei (-0.52%) are also weak. Outside of Asia, DM stock futures are also soft with contracts on the S&P 500 (-0.65%), the NASDAQ 100 (-0.83%) and the DAX (-0.50%) all lower. Meanwhile, 10yr USTs yields (-5.16 bps) have moved sharply lower for an overnight session trading at 3.63% with the 2s10s curve further inverting to -80.37 bps as we go to press. Elsewhere, oil prices are also lower in early Asian trade with Brent Crude (-2.79%) t $81.30/bbl and WTI (-2.95%) $74.02/bbl as demand fears from China are back in focus.

Over in the US, initial Black Friday weekend retail sales numbers are coming through. For example Adobe have said that Americans spent a record $9.12 billion online this Black Friday. The $9.12 billion figure is up 2.3% from previous year’s $8.92 billion and $9.03 billion in 2020. Clearly with inflation running between 7-9% this year that could be seen as a spending recession depending on how you want to spin it. Today is the usually very busy Cyber Monday so we’ll see what that brings.

Looking forward to the week now, it’s a big few days for US employment data, building to a crescendo with payrolls on Friday. We’ll also get the latest PCE inflation reading and the ISM manufacturing print.

Elsewhere, European CPI releases will also be front and centre as inflation and recession risks in the currency bloc weigh on the ECB. In Asia, all eyes will be on China’s PMIs and several key economic activity indicators from Japan. We will also hear from a number of key central bank officials, including Fed Chair Powell and ECB President Lagarde.

Going through the highlights in more detail and there’s only one place to start, and that is with payrolls. This will be the last one before the FOMC on December 13-14th. Our US economists expect a +200k print in November, down from +261k in October, and the unemployment rate to tick back down to 3.6%. Earnings are forecast to grow +0.3%, decelerating from October’s +0.4%.

Prior to Friday we have the latest JOLTS report and ADP reports on Wednesday. In terms of the former, it’s long been our favoured measure of labour market tightness but it’s always a month behind other measures so as we approach a turning point in the labour market it might be tough to use it as a lead indicator. Our economists are focused on the micro of the report and recent evidence of less labour market tightness has been a little less evident under the surface given various sector mismatches. See their report here “Why the JOLTS data are not as encouraging as they appear” for more on that.

Rounding off the important labour market clues, tomorrow’s Conference Board’s confidence measure on Tuesday will include the jobs-plentiful / jobs hard-to-get differential, which has historically been highly correlated with the unemployment rate. Our economists highlight that after peaking at 47.1 in March, consumer views on the labour market have cooled a bit with the differential falling to 32.5 in October. While the October level is still very healthy and in line with the near-recordlow unemployment rate, we need to see how quickly this now deteriorates for clues on the turn in the labour market.

Within Thursday’s personal income (DB at Unch. vs. +0.4% last month) and consumption (DB at +0.7% vs. +0.6%) report the latest reading on the core PCE deflator will be a big release for Fed expectations. Given what we know from the CPI and PPI data earlier this month, our economists expect core PCE inflation to come in at 0.2% (vs. 0.5% previously). If their forecast is correct, the year-over-year rate will begin to fall, dropping a tenth to 5.0%. While only a small decrease in the yearover-year rate’s September peak, this would be the fourth lowest monthly core PCE print since the beginning of 2021, so it may help cement 50bps over 75bps in two weeks’ time.

Business activity-related indicators due out include the manufacturing ISM index on Thursday. Our US economists expect the indicator to slip into contractionary territory (49.8 vs 50.2 in October) for the first time since the Covid depths in May 2020. The day before, we get the Chicago PMI (DB forecast 47.3 vs 45.2 in October) and the advance goods trade balance (DB forecast -$91.0bn vs -$92.2bn in September).

In Europe, the November CPI reports from across the Eurozone on TuesdayWednesday will be among the key data this week. As a reminder, the bloc-wide measure is now at 10.6%, the highest ever, in a sharp contrast to the US where the latest CPI (7.7%) is more than a percentage point below its recent peak (9.1%). With few indicators pointing to a significant slowdown in price increases for Europe, this week’s print may keep up the pressure on the ECB to fight inflation despite growth concerns. In fact, as our European economists point out in their review of central bank’s monetary policy accounts (link here) released this week, contrary to markets’ initial perception, there was little dovishness in last meeting’s message. The team is calling for a +50bps hike in December but acknowledging upside risks, especially if this week’s prints come in above expectations.

We will also get the PPI and consumer spending for France, the PPI and the manufacturing PMI from Italy, as well as confidence indicators for the Eurozone throughout the week.

Over in Asia, all eyes will be on November PMIs from China on Wednesday and Thursday, with the Bloomberg consensus pointing to an unchanged manufacturing PMI on Wednesday (49.2) and a slight drop in the Caixin PMI on Thursday (48.9 vs 49.2). See the day-by-day week ahead for the full diary of events this week.

Recapping last week now, developments over the holiday-shortened week skewed towards impending recession fears, which drove global sovereign yield curves flatter but equities held up well. We had rising Covid cases and renewed restrictions in China, renewed fears over the energy supply to Europe (European natural gas futures climbed +8.30% over the week), contractionary PMIs across the developed world, while Fed staff noted in minutes to the November meeting that a recession was now likely pretty much their base case for next year.

Sovereign 2s10s curves flattened across the US, Germany, and the UK. 2yr Treasury yields were -8.0bps lower (-2.5bps Friday), while 10yr yields fell -15.1bps (-1.5bps Friday), with the curve ending the week at -78bps, its most inverted since the early 1980s. In Germany, 2yr Bunds increased +9.0bps (+8.3bps Friday) while 10yr yields fell -4.0bps (+12.4bps Friday). And in the UK 2yr Gilts climbed +11.4bps (+8.4bps Friday) in contrast to 10yr Gilts which fell -11.7bps (+8.5bps Friday).

The growth fears stoked a renewed bout of central bank pivot optimism, which buoyed equities over the week. The S&P 500 increased +1.53% (-0.03% Friday), the STOXX 600 was up +1.71% (-0.05% Friday), and the DAX lagged, climbing just +0.76% (-0.02% Friday). The biggest underperformers were Chinese equities following a surge in Covid cases which drove renewed lockdown measures. The NASDAQ Golden Dragon index fell -5.96% in response (-3.28% Friday).

Authored by Steve Watson via Summit News,

The overlord of science Anthony Fauci blamed President Trump Sunday for China’s continued obfuscation of the origins of COVID, claiming that it was Trump’s “anti-China approach” that encouraged the Communist state to be non-cooperative.

Now that he has retired, Anthony Fauci is devoting even more time to his favourite hobby, appearing on the news, shilling for China, and telling people to get booster shots.

In his latest appearance on CBS’ Face The Nation, Fauci declared “What happens is that if you look at the anti-China approach, that clearly the Trump administration had right from the very beginning, and the accusatory nature, the Chinese are going to flinch back and say, Oh, I’m sorry, we’re not going to talk to you about it, which is not correct. They should be.”

“I think that horse is out of the barn, and they’re very suspicious of anybody trying to accuse them,” Fauci continued, adding “We need to have an open dialogue with their scientists and our scientists, keep the politics out of it. And let the scientists- because these are scientists that we’ve known for decades, and we’ve collaborated with them.”

Watch:

Fauci defends China for covering up COVID origins, blames Trump for it pic.twitter.com/U08yPQxxL5

— End Wokeness (@EndWokeness) November 27, 2022

He also blamed Republicans for politicising COVID and claimed he has “never been” political:

Anthony Fauci says it was Republicans who “clearly politicized” COVID.

Fauci then claims he personally is “not political at all” and has “never been.” pic.twitter.com/Hbg9mnLKk8

— RNC Research (@RNCResearch) November 27, 2022

Fauci also claimed that China often “acts secretive” even “when there’s nothing at all to hide,” citing the SARS-CoV-1 outbreak in the early 2000s as one example.

That would be the outbreak that China tried to underplay and cover up then.

CBS host Margaret Brennan asked Fauci if he “agrees with that word cover-up?” to which he responded “I don’t know what that means.”

“I’m not sure what they’re talking about. I mean, if cover-up is not allowing people to come in and look at all the data, that’s not a cover, that’s not being transparent,” he further stated.

Anthony Fauci is asked if he agrees with using the words “cover-up” and “intentional distortion” to describe China’s role in COVID.

FAUCI: “I don’t know what that means, no.” pic.twitter.com/NbJnIG1AuC

— RNC Research (@RNCResearch) November 27, 2022

In a separate interview on NBC, Fauci repeated the claim that China always acts secretive and weird… nothing new to see here.

“Even when there’s nothing to hide they act in a suspicious, non-transparent way just probably because they don’t want to make it look like there’s a blame,” Fauci proclaimed.

“Why is the Chinese government acting so peculiar and weird?”

ANTHONY FAUCI: “I don’t mean this in a broad, pejorative way, but…even when there’s nothing to hide, they act in a suspicious, non-transparent way.” pic.twitter.com/1zRRNUCWPf

— RNC Research (@RNCResearch) November 27, 2022

During both interviews, Fauci shilled for more booster vaccines, claiming that multiple shots every year will be needed, and we are still in a pandemic.

Two months after Biden declared “the pandemic is over” — and two years after Biden repeatedly promised to “shut down” the virus — top Biden medical advisor Anthony Fauci says “we certainly are still in” a pandemic. pic.twitter.com/GiPKIFM32l

— RNC Research (@RNCResearch) November 27, 2022

And don’t forget to test everyone before dinner…

“The other thing that we don’t want to forget about is testing,” says Anthony Fauci.

“Test yourself before you congregate with people, particularly when you’re having someone over for dinner.” pic.twitter.com/Nn9uYucOR5

— RNC Research (@RNCResearch) November 27, 2022

He also said he “doesn’t know” if schools will shut down again:

“Coming out of the holidays, should parents expect schools to shut down?”

FAUCI: “I don’t know, Margaret. I’m not sure.” pic.twitter.com/9e9bNG5FFo

— Jake Schneider (@jacobkschneider) November 27, 2022

Finally Fauci, bragged that now the Republicans don’t have control over the Senate, an investigation of him led by Rand Paul is “not going to happen.”

Meanwhile, over at ABC, the latest Biden COVID minion Ashish Jha was asked “what do you do?” in response to the fact that “People aren’t listening” when being told by Fauci and others to get booster shots.

ABC’s Martha Raddatz whines about people not listening to Fauci and getting COVID boosters: “Only about 11% have gotten the booster so far, maybe 42 million the flu shot. We’ve talked about this so many times. People aren’t listening, what do you do?” pic.twitter.com/P0LQGOftKz

— Kevin Tober (@KevinTober94) November 27, 2022

As we noted last week, Jha says he really believes that “God gave you two arms” so you can be injected with both the COVID booster and the Flu shot.

NOW – “God gave you two arms” to get your COVID and flu shot, says the White House COVID Response Director.pic.twitter.com/UAzSfdYJkB

— Disclose.tv (@disclosetv) November 22, 2022

Biden COVID advisor Ashish Jha:

“I really believe this is why God gave us two arms — one for the flu shot and the other one for the COVID shot!” pic.twitter.com/1dC9ChvD5R

— Jake Schneider (@jacobkschneider) September 6, 2022

*  *  *

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Apple shares fell nearly 2% in US premarket trading Monday on news that unrest at the world’s largest iPhone factory in central China could result in a production shortfall of iPhone Pro units this year, according to Bloomberg, citing a person familiar with assembly operations. 

The person said Apple’s manufacturing partner Foxconn Technology Group’s factory in Zhengzhou, could wind up with a 6 million iPhone Pro production shortfall by the end of the year, adding the situation remains fluid and lost production numbers could change. 

A lot will depend on how fast Foxconn can hire new workers and revive full capacity on assembly lines after weeks of unrest at the plant over Covid restrictions and disputes about pay. Thousands of workers were given $1,400 to leave the plant last week, a move by Foxconn to quell the unrest. Still, the Covid situation in China is worsening, and lockdowns in the weeks ahead could create even more production woes. 

News of Apple facing a 6 million iPhone deficit sent shares lower this morning, down nearly 2% as of 0630 ET. 

Bloomberg’s breakdown of Apple’s supply chain shows Foxconn (otherwise known as Hon Hai Precision Industry Co., Ltd.) is a top supplier. Any manufacturing disruption in China could leave AT&T, Best Buy, and Verizon stores without iPhones.  

The facility produces most of the iPhone 14 Pro and Pro Max devices, Apple’s most in-demand devices this year. However, sales for the premium iPhones have rapidly cooled, and Bloomberg reported earlier this month that Apple lowered overall production targets to 87 million devices or fewer, compared with a target of 90 million units earlier. 

“It demonstrates that everyone, even Apple, is susceptible to supply-chain constraints in China due to Covid,” said Anshel Sag of Moor Insights & Strategy.

Morgan Stanley analysts recently estimated the iPhone Pro model shortfall would be around 6 million, but such a forecast was made before the unrest at the plant. 

French researchers have reanimated over a dozen prehistoric viruses which have been trapped deep within the Siberian permafrost for nearly 50 million years, according to a pre-print study.

After obtaining seven ancient permafrost samples, scientists from the French National Centre for Scientific Research were able to document 13 never-before-seen viruses that had been lying dormant in the ice, Science Alert reports.

The same researchers found a 30,000-year-old virus in 2014 which was trapped in permafrost. Notably, it was still able to infect organisms. Now, they’ve beaten their own record with a find that’s 48,500 years old, which they named Pandoravirus yedoma, according to Science Alert.

The scientists, who called these “zombie viruses” a public health threat, pointed to global warming as an ongoing risk that could result in the release of deadly pathogens from long ago.

“Due to climate warming, irreversibly thawing permafrost is releasing organic matter frozen for up to a million years, most of which decomposes into carbon dioxide and methane, further enhancing the greenhouse effect,” the authors wrote. “Part of this organic matter also consists of revived cellular microbes (prokaryotes, unicellular eukaryotes) as well as viruses that remained dormant since prehistorical times.“

As Global News notes,

Some of these “zombie viruses” could potentially be dangerous to humans, the authors warn. And, in fact, thawing permafrost has already claimed human lives.

In 2016, one child died and dozens of people were hospitalized after an anthrax outbreak in Siberia. Officials believe the outbreak started because a heat wave thawed the permafrost and unearthed a reindeer carcass infected with anthrax decades ago. About 2,300 reindeer died in the outbreak.

The revived viruses belong to the following sub-types;  pandoravirus, cedratvirus, megavirus, pacmanvirus and pithovirus – and are considered “giant” because they are large and easy to spot using light microscopy.

Beware of rotting Siberian bears.

Pressure has continued building for the Biden administration and Pentagon to provide stricter oversight and accounting for the massive military assistance and weaponry sent overseas to Ukraine, at a moment total defense aid is about to hit the $20 billion mark. 

GOP leaders have warned the Biden administration to expect greater restrictions and oversight during the next Congress. This as the kind of enthusiastic support for the Ukrainians among the broader American public seen in the opening months of the war appears to have turned to frustration at the spectacle of open-ended amounts of taxpayer funds being poured into a conflict which has no end in sight…

Tucker Carlson and L. Todd Wood question why Democrats have fought against an audit of the tens of billions of dollars the US has sent to Ukraine. pic.twitter.com/c08s2pfZmZ

— The Post Millennial (@TPostMillennial) November 26, 2022

Despite the State Department and Pentagon recently presenting plans to ensure greater oversight, Republicans who will soon enjoy a slim majority in Congress are readying to press for more, reports The Washington Post.

“Yet the reckoning could begin before the Republican takeover. A series of provisions on offer in the House-passed version of this year’s annual defense authorization bill would require a web of overlapping reports from the Pentagon and the inspectors general who police transfers of articles of war, plus the establishment of a task force to design and implement enhanced tracking measures,” The Washington Post writes. 

Among the most dangerous and ambitious of these efforts so far was reveled weeks ago. American troops are said to be performing “inspections” of US weapon caches on the ground in Ukraine, but significantly away from frontline fighting. There have already been several inspections overseen by a US Defense attache and a US Office of Defense Cooperation team based out of the Ukrainian capital. 

Yet as the new Washington Post reporting details, a growing number of Democrats are joining skeptical Republicans: 

“The taxpayers deserve to know that investment is going where its intended to go,” Rep. Jason Crow (D-Colo.), a veteran-turned-lawmaker, said in an interview.

Crow led an effort in the House Armed Services Committee to include in the defense bill instructions to the Defense Department Inspector General to review, audit, investigate and otherwise inspect the Pentagon’s efforts to support Ukraine. He called the directive “necessary,” even if he does not count himself among the critics insinuating the Defense Department and the Ukrainians have failed to take the matter seriously enough.

Recently there have even been documented instances of large amounts of US weaponry falling into the hands of Russian forces. And perhaps even more alarming is that Western-provided arms are ending up on the black market, and even make their way outside the country to criminal gangs, as the government of Finland recently admitted. 

“We’re not playing a mission of perfection here. This is a brutal, large-scale land war — house to house, street to street, trench to trench. There will be things lost,” Rep. Crow said further. “We’re not trying to prevent every single piece from falling into the hands of the Russians, but we want to make sure it’s not happening at a large scale.”

Authored by Steve Straub via The Federalist Papers,

A Cambridge University dean is claiming that Jesus could have been transgender based on an image found in a fourteenth century painting.

Via the Daily Mail:

Church worshippers cried ‘heresy’ at the Dean of Trinity College as they left a sermon claiming Jesus may have been transgender ‘in tears’.

But the view of a transgender Jesus is ‘legitimate’, according to Dr Michael Banner, the Dean who stepped in to defend the claim made at a Sermon last Sunday that Christ had a ‘trans body’.

Dr Michael Banner, the Dean of Trinity College, was backing up junior research fellow Joshua Heath, who displayed Renaissance and Medieval paintings of the crucifixion depicting a side wound that he likened to a vagina in front of the congregation.

The side wound ‘takes on a decidedly vaginal appearance’, said Heath, whose PhD was supervised by the former Archbishop of Canterbury Rowan Williams.

The Dean of Trinity College, Dr Michael Banner, has stepped in to back up the view of a transgender Jesus after a junior research fellow claimed Christ had a ‘trans body’ last Sunday

The research fellow used the 1400th-century painting Pietà with the Holy Trinity by Jean Malouel to illustrate his point

‘In Christ’s simultaneously masculine and feminine body in these works, if the body of Christ as these works suggest the body of all bodies, then his body is also the trans body,’ claimed the researcher.

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Heath used the 1400th-century painting Pietà with the Holy Trinity by Jean Malouel, on display in the Louvre, to illustrate his point, according to The Daily Telegraph.

This just shows that the people who work in academia are either nuts or pretend to be nuts in order to keep their jobs.

To claim Jesus was transgender based on a side wound in a fourteenth century painting, and to take that claim seriously shows how far gone these people are.

The culture wars are over and conservatives have lost. Time for a new strategy.

Authored by Thomas Brooke via Remix News,

The current size of the British Army is only sufficient if its goal is to “stay at home and tootle around,” Britain’s Defense Secretary Ben Wallace warned on Thursday.

Speaking to The Times newspaper following a meeting in Oslo with Allied counterparts on-board the HMS Queen Elizabeth aircraft carrier, the U.K. defense minister urged for the country’s defense to be properly funded amid concerns of future cutbacks of personnel.

“If we just want to stay at home and do a bit of tootling around, we’ve got an armed forces big enough,” Wallace told the newspaper, explaining that Britain’s “international alliance of 30 people,” otherwise known as NATO, continued to act as Britain’s military deterrent.

He added, however, that measuring the sufficiency of the British Army is dependent on what the new government’s foreign policy objectives look like.

“We get in trouble when governments promise things without backing them up – they want to be everywhere… but they don’t fund it,” he told the newspaper.

With Army numbers dwindling and expected to drop by around 10,000 troops after cost-cutting measures were approved by ministers last year, Wallace, who has served as Britain’s defense minister under three separate Conservative administrations since 2019, vowed to “design an armed forces to fit the threat and to fit the ambition of the prime minister.”

The once-feared British Army will soon consist of just 72,500 soldiers, a 200-year low dating back to the Napoleonic Wars.

Wallace was tipped by many to be a front-runner to succeed Boris Johnson when he stepped down in July, but ruled himself out of the top job.

Authord by Lily Zhou via The Epoch Times (emphasis ours),

The head of London Fire Brigade (LFB) said complaints will be handled externally from Monday after an official report published on Saturday said the brigade is “institutionally misogynist and racist.”

The Independent Culture Review, commissioned by London Fire Commissioner Andy Roe following the suicide of 21-year-old trainee firefighter Jaden Matthew Francois-Esprit in 2020, was led by former Chief Crown Prosecutor Nazir Afzal.

In conclusion, Afzal said that his 10-month review found “dangerous levels of ingrained prejudice against women and the barriers faced by people of colour spoke for themselves,” and that the LFB is “institutionally misogynist and racist.”

But he also stressed that his team didn’t find “the same level of operational bigotry” as were found in the Metropolitan Police, where there had been flagrant examples of police officers misusing power and allowing prejudice to shape their actions.”

Roe thanked Afzal for the review, saying he “completely accept[s]” the report’s 23 recommendations and will be fully accountable for improving the LFB’s culture.

In the report, Afzal said female and non-white firefighters are more likely to be subject to disciplinary action, less likely to be promoted, and frequently bullied, sometimes resulting in the loss of talented people.

The report cited testimonies including a noose being put above a black firefighter’s locker; a female firefighter receiving video calls from a man exposing his genitalia after making complaints over misogynistic behaviour; and a muslim firefighter being verbally abused and having bacon put in his sandwich, a pork sausage put in his pocket, and terrorism hotline sticker placed on his locker.

It also said most abuses had gone undetected as victims were convinced “the consequences of speaking out will be worse than the consequences of silence,” while perpetrators, “faced with exposure, commonly turn on their victims, try to assassinate their characters, and get others to do the same.”

The culture differs between teams, the report said.

“Most participants found that the place where they worked was a supportive and friendly environment. But they knew of other watches/teams where they would not want to work,” the report says.

It also cited Francois-Esprit and his friend and fellow trainee, who had been sent to a different station “with a supportive culture and a strong team that he was made to feel a part of.”

Francois-Esprit hung himself in 2020 after a significant deterioration of his mental well being in the weeks leading to his death.

According to the report, the friend said Francois-Esprit had spoken of “excitement” about completing the training programme before being sent to the Wembley station, but his enthusiasm was later “gone” as he “felt unsupported and didn’t fit in.”

No Evidence Bigotry Impacted Work With Public

Afzal also stressed that his team didn’t find “the same level of operational bigotry” as was found in the Metropolitan Police, where there had been flagrant examples of police officers misusing power and allowing prejudice to shape their actions.”

“The behaviour of firefighters going through women’s drawers was particularly troubling,” he said, referring to a female firefighter’s account that male firefighters “go through women’s drawers looking for underwear and sex toys” when doing house checks.

“But we did not see evidence of demonstrable bigotry in fire stations impacting on their work with the public,” he continued. “‘It’s like someone pulls a switch,’ one black firefighter told us. ‘They change when they’re on the fireground. It’s like they remember why they’re firefighters.’”

The report also mentioned the fire at the Grenfell Tower, which it said “loomed large” over the review and had “undoubtedly had a seismic impact on the culture of LFB.”

The 2017 accident consumed 72 lives, making it the worst residential fire in the UK since World War II.

Staff “repeatedly” told the review team that the incident had taken its toll on their mental health, the report said, saying the review recognises “the profound impact of Grenfell in the anger of firefighters who took significant personal risks on the night, and then felt the public criticism of the Brigade’s response personally.”

The report recommended LFB management adopt “zero tolerance policy for bullying, racist, and misogynistic behaviour in the workplace,” by taking Equality, Diversity, and Inclusion Training and setting up an independent complaints service.

The 23 recommendations also include considering anonymised reporting of incidents relating to bullying, misogyny and racism and reviewing complaints made in the last five years, introducing body worn video for fire safety home visits, ensuring there are secure facilities for all women in stations, improve transparency in the promotion process, and investigating signs of deterioration in mental wellbeing.

Authored by Andrew Thornebrooke via The Epoch Times (emphasis ours),

U.S. regulators have imposed a ban on electronic equipment created by several major Chinese tech corporations, citing national security concerns.

The Federal Communications Commission (FCC) adopted new rules on Nov. 25 that will prohibit the import or sale of Chinese communications equipment deemed to pose an unacceptable risk to national security.

The new rules will bar equipment from Chinese telecom firms Huawei and ZTE from being imported into or sold in the United States. The order will also prohibit telecommunications equipment and video surveillance equipment produced by Hytera, Hikvision, and Dahua, as well as the companies’ subsidiaries or affiliates

By unanimous vote, the FCC concluded that the products posed an “unacceptable risk to [the] national security of the United States or the security and safety of United States persons,” according to a statement.

“The FCC is committed to protecting our national security by ensuring that untrustworthy communications equipment is not authorized for use within our borders, and we are continuing that work here,” said Chairwoman Jessica Rosenworcel.

“These new rules are an important part of our ongoing actions to protect the American people from national security threats involving telecommunications.”

Products from the companies will not be allowed for import, marketing, or sale until the FCC approves the measures taken by the companies to remedy how their products might be used against the national interest.

Congress voted to bar all federal agencies from purchasing products from the five listed companies back in 2018. The new rules will expand and modify the FCC’s “Covered List” of banned products to prevent private entities from bringing the items into the United States.

“Today, the FCC takes an unprecedented step to safeguard our communications networks and strengthen America’s national security,” said FCC Commissioner Brendan Carr.

“Our unanimous decision represents the first time in the FCC’s history that we have voted to prohibit the authorization of communications and electronic equipment based on national security considerations.  And we take this action with the broad, bipartisan backing of congressional leadership.”

The order on Friday implemented requirements from the Secure Equipment Act of 2021, which was signed into law by President Joe Biden last November, the FCC said.

Australia, Canada, New Zealand, the UK, and the United States have all declared the use of Huawei telecommunications equipment, particularly in 5G networks, to pose significant security risks to infrastructure. U.S. officials and experts have also sounded the alarm that the company’s ties to the Chinese Communist Party mean that its products could be used to spy on Americans or interfere with the free flow of data worldwide.

Read more here…

Authored by Daniel Lacalle,

Only 15 years ago, the European Union produced more natural gas than Russia exported, according to the EIA. Repeating past mistakes and maintaining a failed energetic interventionist policy would only worsen what is already a structural disaster.

The prohibitive cost of electricity and gas in Europe is not a result of market flaws, but of a completely unsustainable cost structure where consumers are forced to pay escalating taxes, a hidden CO2 tax, subsidies, and other rising regulatory costs. More than 60% of an average euro area country household bill is made up of taxes and regulated costs, according to Eurostat.

Brussels cannot turn water into wine, and, similarly, the European Union cannot “cap” the price of natural gas and oil. It is almost ironic, but European leaders are spending days debating whether to impose a cap on Russian oil that would be set above the current Urals price and significantly above the five-year average levels.

The only thing that these so-called “caps” would achieve in a global energy market is to provide a massive subsidy that would then have to be repaid with higher tariffs or taxes afterwards. In Spain they already made the horrifying mistake that led to what was called the tariff deficit: Putting a cap on a tariff and passing the difference with the actual price to the following year with added interest charges. What the tariff deficit mechanism did was perpetuate higher tariffs even in periods of low commodity prices as the tariff deficit ballooned. The proposed gas cap would produce a comparable tariff deficit but at an enormous level if implemented throughout Europe.

Additionally, in a globalized and international market, the cap would create enormous arbitrage incentives that would only benefit China, which would continue purchasing cheap Russian commodities and exporting to Europe its more competitive goods.

We must not forget that the natural gas “cap” in Spain has been a genuine catastrophe. Elevating it to Europe would be worse.

According to Enagas data, natural gas demand in Spain soared while it declined in the rest of Europe, due to the disguised subsidy that the “cap” entails. Additionally, the cost of the measure for the country has increased to 13 billion euros, according to the power sector, which all citizens will pay with higher taxes, and this has led to a massive transfer of funds to France, which benefits from purchasing subsidized energy from Spain at a discount price while Spanish consumers pay the cost in higher bills.

The total cost of exports to France has exceeded 715 million euros (from 15 June to 4th November, according to sources of the power sector). Additionally, a significant increase in tariffs (+98 €/MWh) is added for clients with fixed contracts, converting their fixed contracts into variable ones due to the subsidy of natural gas prices.

The creation of a tariff deficit, which is what the current proposal would do to Europe, implies higher future costs and a larger debt burden. Short-term price “cuts” on gas and oil disguise the reality, incentivize demand while also creating an overcharge whose financing will result in higher prices and taxes in the future.

A European gas and oil cap causes no harm to Russia at all. We should have learned by now and that through exports to China, India, and other Asian countries, Russia continues to set trade surplus records.

A European “cap” on Russian gas and oil would be a subsidy to China at the expense of European taxpayers.

Additionally, by short-term subsidizing the price, the gas cap would create an artificial demand and a perverse incentive. More natural gas consumption and the long-term reliance on fossil fuels is maintained.

A cap on natural gas prices leads to higher consumption of fossil fuels, higher taxes, and bills while it penalizes renewable investment and a competitive energy transition.

What should the European Union do then?

The European Union needs a competitive energy policy that makes use of all available technologies. Eliminating, delaying, and placing bureaucratic barriers to investments in supply-chain security is a luxury no nation can afford.

• Use the EU’ extraordinary tax receipts from the sale of CO2 emission rights, which are estimated at more than twenty billion euro in the EU for 2022, to lower tariffs for the neediest families.

• Reduce the taxes on gasoline and gasoil that are more than 50% of the final price for the least fortunate and small businesses. The same for natural gas, where taxes add up to more than 30% of the tariff.

• Reduce the regulated costs burden included in consumer tariffs. Most of those regulated costs and subsidies have nothing to do with energy consumption and ought to be included in each country’s budget.

• Extend the life of nuclear plants and invest in new reactors.

• Support renewable energy eliminating the regulatory risk that negatively impacts capital attraction.

• Supporting renewable energy means securing the necessary amounts of lithium, copper, and cobalt.

• Facilitate investments in natural gas development and lifting the ban on the exploration and exploitation of unconventional gas.

• Reach long-term contracts with the major producers of liquefied natural gas, as China did when it closed its 27-year contract with Qatar.

• Eliminate taxes imposed on energy companies. They are the key to invest in security of supply.

• Strengthening the security of supply and stability provided by hydroelectric energy through contract extensions and investments in mini hydro.

• Provide tax benefits for investing in cogeneration.

• Supporting long-term investments in grid and networks and energy sources like green hydrogen with tax benefits.

The most important lesson is that the European Union will not solve an energy crisis created by interventionism by adding more bureaucracy, legal and regulatory instability and penalizing with higher taxes those that can invest in energy security.

The energy crisis, which was already a high-cost issue for European citizens in 2019, will become a price and supply issue soon if the European Union disregards these measures and continues to impose interventionist policies, raising taxes and imposing idealistic and industrially unviable models.

If the necessity of securing supply and mining of copper, cobalt, lithium, and rare earth metals is not understood, together with the need to strengthen nuclear, natural gas and hydro, the European Union will switch from being dependent on Russia to being dependent on Russia and China.