It’s ugly out there. Futs are sharply lower on doubts about whether the Fed will cut interest rates again in December, as fear deepens about stretched AI valuations and the debt used to fund them. S&P 500 futures are down 1% at 8:00 a.m.ET following continued unwind of momentum/AI thematic + hawkish Fed digestion (Kashkari undecided on Dec cut yesterday makes 5 officials now questioning/mkt currently pricing ~50% of Dec cut vs ~66% last Friday; more hawks today Schmid today @ 10:05am, Logan 2:30pm, Bostic 3:20pm); Nasdaq futures plunge 1.6%, pointed to a fourth consecutive day of losses in a week in which aggressively-built long positions in momentum stocks were unwound and value baskets comfortably outperformed. Pre-market, Mag 7 are all underperforming: TSLA -2.6%, NVDA -1.1%, META -0.5%. The VIX rose above 22.55, and is at session highs. Bond yields are sharply lower following a huge block of 135,000 10Y futs sold; USD was higher but then repriced sharply lower to LOD just around 7am ET. Commodities are mostly higher: oil +2.6%, sugar +1.6%. Bitcoin sank to a six-month low below $95K. This morning, we have seen a continuation of momentum unwind in the equities markets given valuation and positioning of the AI story; NVDA fell again into it earnings next week.

In premarket trading, Magnificent Seven all retreated in premarket trading as doubts over an interest-rate cut in December deepened concerns about stretched valuations (Tesla -4.8%, Nvidia -3.1%, Alphabet -2.7%, Amazon -1.6%, Meta -1.5%, Microsoft -0.6%, Apple -0.1%)

• AI-related energy stocks are sliding: Bloom Energy -8%, Oklo -7.7%, NuScale Power -8%, Nano Nuclear Energy -7.3%, Plug Power -7.2%, IREN -9%
• Applied Materials (AMAT) declines 6.5%. The chip-equipment maker suffered a sales decline last quarter and predicted another drop in the current period, though the company sees demand improving in the second half of 2026.
• Avadel Pharma (AVDL) jumps 18% after the pharmaceutical company said it received an unsolicited proposal from H. Lundbeck A/S to acquire it for up to $23.00 per ordinary share.
• Cidara Therapeutics (CDTX) is up 104% after Merck & Co. agreed to acquire the biotech company, which is developing a flu treatment.
• Gap Inc. (GAP) is up 1.6% after Jefferies upgraded the clothing retailer to buy from hold.
• Red Cat Holdings (RCAT) plunges 17% after the drone company’s FY25 revenue forecast missed the average analyst estimate.
• Stubhub (STUB) tumbles 19% as analysts note that it was surprising that the ticketing platform did not provide a forecast for the current quarter. It was the firm’s first quarterly report after going public in September.
• TripAdvisor Inc. (TRIP) is up 0.8% after Mizuho Securities upgraded the online travel agency to neutral from underperform.
• Warner Bros Discovery (WBD) is up 2.8% after the WSJ reported Paramount, Comcast and Netflix are preparing bids for the media company, citing people familiar. Separately, the owner of HBO and CNN in a filing said CEO David Zaslav’s employment agreement was amended amid a strategic review.

In corporate news, Citigroup’s CEO Jane Fraser says her bank is growing “rapidly” in China with reviving interest from investors and companies in the world’s second largest economy. NBA star Stephen Curry is leaving Under Armour, the sportswear firm that partnered with him for more than a decade. 

One doesn’t need to look at futures to see the signs of growing nervousness, with volatility in bond markets also on the rise. Minneapolis Fed president Neel Kashkari said Thursday he didn’t support the US central bank’s last interest-rate cut, though he’s still undecided on the best course of action for its December policy meeting. Markets are now pricing in less than a 50% chance of a cut next month, down from about 63% earlier this week and over 95% a month ago. Just after 7am ET, we saw a purchase of 135K 10Y futs which slammed yields 6bps lower in minutes.

It is not just the US which are volatile this morning: UK government bonds are lower, with larger declines at the long end after reports that Chancellor Reeves dropped plans to raise headline income tax rates. Thirty-year gilt yields rise 10 bps to 5.33%. Gilts found some support after Bloomberg reported Reeves’ decision was driven by an improved fiscal forecast from the budget watchdog.

AI euphoria is facing an acute test, as investors look are finally looking at the massive borrowing to fund the technology’s buildout (something we first warned about over a month ago). Support for the three-year bull market increasingly rests with a strong earnings outlook, and especially next week’s NVDA earnings. Still, foreign inflows into US equity funds are tracking at an annualized $134 billion, the second-biggest year ever after $163 billion in 2024, according to Bank of America citing EPFR Global data. US stocks saw their ninth-straight week of inflows through Nov. 12 at $6.4 billion. Meanwhile, a rotation from tech into more defensive stocks has helped the S&P 500 limit losses to just over 2% since its last record high toward the end of October, while the Nasdaq 100 has dropped nearly twice as much.

“The nervousness is palpable on markets and it stems from different corners,” said Arnaud Girod, head of economics and cross-asset strategy at Kepler Cheuvreux in Paris. “Any pushback from the Fed on interest rate cuts is bad news. If the Fed hasn’t enough data, they are likely not to cut.”

That said, while the market-cap weighted S&P has faced volatility and a recent downturn, beneath the surface, US equities remain healthy, lifting the equal-weighted index and underscoring the broader market’s reliance on, and concentration risk around, AI according to Bloomberg.

“We’ve seen tech stocks suffer the biggest repercussions each time there’s been a setback, and that’s because they trade at the frothiest valuations,” said Aneeka Gupta, director of macro research at Wisdom Tree UK. “Whenever there are question marks on whether there is a higher probability of a hawkish Fed stance, the segments that get hit the most are the highest duration ones.”

In trade news, Trump is readying substantial tariff cuts aimed at tackling high food prices and a series of new trade deals. Meanwhile an agreement with Switzerland could be close. 

European stocks are broadly lower, including in the UK where the FTSE 100 drops 1.4%. UK equities underperformed on reports of a U-turn by Chancellor of the Exchequer Rachel Reeves on income tax hikes. Siemens Energy led energy stocks higher after raising guidance, while banks and tech shares were among the biggest laggards. Here are some of the biggest movers on Friday:

• Bechtle shares surge as much as 17%, the most in eight months, after the supplier of computers and office supplies reported a significant improvement in earnings in the third quarter compared to the second.
• Siemens Energy shares are up as much as 12%, the most since April, after the German energy company raised Ebitda guidance above consensus, citing strong demand for gas turbines and data center equipment.
• Richemont shares gain as much as 8.7%, the steepest advance since April, after the Swiss luxury-goods maker reported first-half results that beat analyst expectations across divisions and regions, particularly driven by strong demand for its jewelry brands.
• Orkla shares gain as much as 6.7%, the most since May, after the Norwegian consumer goods firm reported what DNB Carnegie said were slightly positive earnings.
• Alstom shares advance as much as 7.2%, the most since June, as analysts laud the company’s latest earnings as a reassuring and strong showing from the French rolling stock company.
• Bavarian Nordic shares drop as much as 7.8% to the lowest since July after the Danish vaccine maker’s revenue guidance for the full year was weaker than expected.
• Sonova shares drop as much as 6.1% to the lowest intraday since September 2020 after the Swiss hearing-aid maker reported weaker-than-expected Ebita for the first half-year.
• Swiss Re shares slip as much as 5.1%, the most since April, after posting a “mixed” quarter in the eyes of analysts.
• Goodwin shares drop as much as 12% after the Goodwin family sold 122,368 ordinary shares in the company to a limited number of institutional investors.
• Land Securities shares fall as much as 5% after the UK real estate firm reported lower-than-expected net asset value and dividends.

Earlier in the session, Asian stocks declined, led by technology-heavy markets, as concerns over lofty valuations and uncertainty around the Federal Reserve’s rate outlook dampened sentiment.  The MSCI Asia Pacific Index dropped as much as 1.7% on Friday to head for its biggest decline since April. Technology megacaps including TSMC, SK Hynix and Samsung Electronics were the major drags. South Korea posted the steepest loss in the region, while Japan’s Nikkei 225, Taiwan’s Taiex index and the Hang Seng China Enterprises Index all dropped over 1.5%.  In China, economic activity cooled more than expected at the start of the fourth quarter, with an unprecedented slump in investment and slower growth in industrial output adding to a drag from sluggish consumption. The onshore CSI 300 Index closed 1.6% lower, the most in nearly a month. 

“The market sell off is mainly driven by disappointing macro economic data and increasing concern on leading e-commerce companies profitability,” said Jason Chan, senior investment strategist at Bank of East Asia in Hong Kong. “Also, many cities in Fujian province announced the trade-in subsidy of auto will be suspended in November, which heightens policy uncertainty on consumption stimulus.”

In FX, the BBG Dollar index saw a sudden airpocket led by yield differentials as 10Y yields tumbled 6bps just after 7am ET. The pound pared losses but remains down 0.4%.

In rates, treasuries erased losses in early US trading amid a curve-steepening rout in gilts, where reports that UK government will drop a proposed income tax increase have sparked jitters about its fiscal credibility. US yields retreated from session highs reached during the gilt selloff as US stock index futures slide, led by European equity markets. Front-end Treasury yields are lower by 2bp-3bp with long-end tenors little changed, steepening 2s10s and 5s30s spreads; 10-year, about 2bp lower on the day near 4.10%, peaked near 4.14% as UK 10-year yield surged as much as 13bp. UK yields remain cheaper by 4bp-10bp across a steeper curve after reports that Chancellor Rachel Reeves will drop a widely-expected income-tax increase in this month’s budget. US session includes three scheduled Fed speakers, while economic data continues to be delayed as the US government recuperates from its record-length shutdown.

In commodities, oil prices jump after a drone strike damaged an oil depot and a vessel at Russia’s Black Sea port of Novorossiysk. WTI crude rises 2.6% to near $60.20 a barrel. Gold slips about $9 to $4,162 an ounce, while Bitcoin falls 1.8% to around $97,000.

US economic calendar expected to continue to face delays as government reopens; October retail sales and PPI were scheduled to be released Friday. Fed speaker slate includes Schmid (10:05am), Logan (2:30pm) and Bostic (3:20pm)

Market Snapshot

• S&P 500 mini -0.3%
• Nasdaq 100 mini -0.6%
• Russell 2000 mini -0.3%
• Stoxx Europe 600 -1.2%
• DAX -0.9%
• CAC 40 -0.9%
• 10-year Treasury yield +1 basis point at 4.13%
• VIX +1.2 points at 21.2
• Bloomberg Dollar Index +0.1% at 1217.34
• euro -0.1% at $1.1616
• WTI crude +2.8% at $60.31/barrel

Top Overnight News

• The White House unveiled trade deals with Argentina, Ecuador, Guatemala, and El Salvador as part of an initiative to reduce food prices/ address affordability challenges for American consumers. FT
• Ukrainian drones attacked Russia’s giant Black Sea port of Novorossiysk overnight, prompting a state of emergency. Moscow launched a massive air strike on Kyiv that killed four and damaged several residential buildings. BBG
• NEC Director Hassett said he expects to see 60k job losses due to the government shutdown, while he responded that the numbers they have are consistent with more rate cuts, when asked about inflation.
• Signs of weakness in China’s economy stretched into October, with one measure of investment notching the sharpest slowdown in years. Retail sales was about inline at +2.9% (vs. the Street +2.8% and down from +3% in Sept) while industrial production fell short at +4.9% (vs. the Street +5.5% and down from +6.5% in Sept) and fixed asset and property investment declined at one of the sharpest rates in years. WSJ
• Sir Keir Starmer and Reachel Reeves have ditched their manifesto-busting plan to increase income tax rates, in a dramatic U-turn ahead of the Budget on Nov 26 that sparked a sell of in the gilt mkt. FT
• China’s unreported gold purchases could be more than 10x its official figures as it quietly tries to diversify away form the USD, highlighting the increasingly opaque sources of demand behind bullion’s record-breaking rally. FT
• Brazil hopes to reach a preliminary agreement with the US as soon as this month. India and Canada will work together to secure supply chains in critical minerals and clean energy, signaling a reset in bilateral ties. BBG
• Canada’s forestry industry plans to divert a significant shares of its wood exports from the US to new intl mkts, claiming that Trump’s latest trade tariffs will lead to lumber shortages and drive up building costs in America. FT
• Palantir is planning a “significant investment” in the UK to win military contracts, even as the software company has complained about slow traction in Europe.
• Paramount, Comcast and Netflix are preparing bids for Warner Bros. Discovery. WSJ

Trade/Tariffs

• US President Trump’s administration is preparing tariff exemptions in a bid to lower food prices, according to NYT
• US Secretary of State Rubio met with Brazil’s Foreign Minister and discussed a reciprocal framework for the US-Brazil trade relationship, according to the State Department
• US senior official said agreements with Argentina, Ecuador, El Salvador and Guatemala open markets to US agricultural and industrial products, expects full agreements with most of these countries to be finalised within the next two weeks, in which the four countries agreed not to impose digital service taxes. Furthermore, the tariff rates will remain for these countries, but framework agreements will provide relief in certain areas, including bananas.
• US senior official said talks with Switzerland on Thursday were very positive, and if the deal is accepted by US President Trump, we would see a reduction of tariffs on Swiss imports. The official also commented that they have made a lot of advances with Taiwan.
• South Korea announced the factsheet with the US was finalised and President Lee said that US President Trump made a rational decision for the factsheet, while Lee added they agreed that investment in the US will be limited to commercially viable projects and that South Korea and the US will build a new partnership for shipbuilding, AI and the nuclear industry. Lee stated that the sides agreed on South Korea building a nuclear-powered submarine, and South Korea will strengthen ties with companies like NVIDIA.
• South Korean Presidential Adviser said the US will give South Korea chip tariff terms that are no less favourable than Taiwan’s, while it was agreed with the US that forex market stability needs to be ensured and that the amount and timing of fund supply to the US can be adjusted if needed for forex stability.
• White House said the US and South Korea deal includes USD 150bln of Korean investment in the shipbuilding sector approved by the US and USD 200bln of additional Korean investment committed pursuant to an MOU on strategic investments, while the US has given approval for South Korea to build nuclear-powered attack submarines. US said it will reduce its Section 232 sectoral tariffs on automobiles, auto parts, timber, lumber and wood derivatives of South Korea to 15%, and for any Section 232 tariffs imposed on pharmaceuticals, the US intends to apply a tariff rate no greater than 15% to originating goods of South Korea. Furthermore, South Korea is committed to spending USD 25bln on US military equipment purchases by 2030 and shared its plan to provide comprehensive support for US Forces Korea amounting to USD 33bln in accordance with South Korean legal requirements, while the US agreed that South Korea will pay USD 20bln annual phased instalments as part of the trade deal.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were pressured following the sell-off stateside, where tech was hit on valuation and China AI race concerns, while sentiment was also not helped by recent hawkish-leaning Fed rhetoric and mixed Chinese activity data. ASX 200 was dragged lower by weakness in tech and with nearly all sectors in the red aside from energy.     Nikkei 225 dipped beneath the 51,000 level and was among the worst performers amid earnings results and tech woes. Hang Seng and Shanghai Comp declined with participants digested the recent data releases, including mixed activity data in which Industrial Production disappointed and Retail Sales marginally topped estimates, but both showed a slowdown from the previous, while Chinese House Prices continued to contract. Nonetheless, the downside in the mainland was somewhat cushioned with China pledging to expand domestic demand and stabilise trade.

Top Asian News

• China stats bureau spokesperson said the economy was generally stable in October, but pressure to adjust the domestic economic structure remains high and stabilisation faces some challenges, while China is to improve the effectiveness of macro policies and to pursue higher-quality economic growth. China will also expand domestic demand on all fronts and will further spur private investment vitality. Furthermore, the spokesperson said China’s investment space and potential remain huge and that China will stabilise trade and help trade firms that have been heavily hit.
• South Korean Finance Minister said they are to prepare measures to stabilise the FX market with the pension fund, while he is concerned about increasing uncertainty in the FX market and noted it is necessary to address imbalances in FX supply and demand.
• Chinese Defence Ministry says the Japanese side “will only suffer a crushing defeat” should it dare to take a risk.
• Hong Kong revises its 2025 GDP forecast to 3.2% (prev. 2-3%).
• Japan’s automobile union (JAW) says there are no plans to scale back the wage demand for next year, despite a hit from US tariffs. Wage hikes are key to attaining a demand driven economy.

European Equities – Opened broadly lower, with all major indices in the red as sentiment soured following weakness in APAC trade, where tech underperformed on valuation and China AI concerns. Recent hawkish Fed rhetoric and mixed Chinese data also weighed. UK headlines dominated the morning, with reports that PM Starmer and Chancellor Reeves will scrap plans to raise income tax, further pressuring the FTSE 100 (-1.2%). EZ GDP and employment data were largely shrugged off, while attention now turns to ECB’s Buch, Elderson, and Lane. European sectors – Opened mostly lower, with only Energy (+1.0%) and Consumer Products & Services (+0.7%) in positive territory. The latter was lifted by Richemont (+8.0%) after stronger-than-expected H1 revenue and profit, while Energy gained on elevated crude prices following a Ukrainian drone strike on Russia’s Novorossiysk oil depot and upbeat results from Siemens Energy (+9.9%), which raised 2026 guidance. Laggards include Technology (-2.7%), Banks (-2.0%), and Basic Resources (-2.0%). Tech mirrored US weakness amid renewed US–China AI race concerns, while softer Chinese industrial output weighed on resources. Banks underperformed on UK political turbulence, with HSBC (-2.8%), Lloyds (-3.4%), and Barclays (-2.8%) all lower.

Top European News

• UK PM Starmer and Chancellor Reeves reportedly ditched budget plans to increase income tax rates, according to FT. Since, improved UK forecasts reportedly led Chancellor Reeves to drop the Income Tax hike, via Bloomberg citing sources.
• ITV’s Peston posts the UK Chancellor “is NOT going to take greater risks with the public finances, which is what investors quite understandably fear is happening”. Peston, citing sources, writes that the Chancellor will increase the headroom from the GBP 9bln at the last budget to GBP 15bln or more; “that will happen”. Expects Reeves and/or PM Starmer to make it clear today that they will not weaken their commitment to the fiscal rules and increasing headroom. Changes are due to the Treasury receiving improved data on current/expected future wage growth, which has increased tax revenue forecasts; reducing the need to increase tax rates re. Income Tax. New “tax masterplan”: extend the Income Tax threshold increase by another two years; look at reducing the threshold where 40p and 45p tax bands kick in.
• German Budget Committee approved the 2026 budget, which clears the path to parliamentary approval, while the budget has total spending of EUR 524.5bln and includes investments of EUR 58.3bln and borrowing of EUR 97.9bln.
• German 2026 net new borrowing to rise to EUR 98bln (vs. 89.8bln in the draft), via Bloomberg citing a document.
• ECB’s Elderson says he favours easier rules and fewer requirements for small banks.

FX

• USD – DXY is little changed after a subdued overnight session, following yesterday’s weakness when USD-denominated assets came under pressure amid a broader risk-off tone. With the government now reopened, focus shifts to the release of delayed economic data, though no official schedule has been confirmed — one could, however, be announced as early as today. In early European trade, DXY continues to hold within a narrow 99.109–99.336 range, well within Thursday’s 98.991-99.591 range.
• EUR – EUR/USD is trading slightly softer in early European hours after holding onto the prior day’s gains during APAC trade, remaining above the 1.1600 handle amid ongoing dollar pressure. Newsflow for the Eurozone is light, with the pair contained within a 1.1618–1.1648 intraday range and well within yesterday’s 1.1579–1.1656 parameters. The 50DMA and 100DMA sit just above at 1.1660 and 1.1662, respectively.
• GBP – GBP/USD is in focus this session following reports that Chancellor Reeves has scrapped plans for an income tax rate hike, a move seen as increasing fiscal risks ahead of the November 26th budget. Gilts slipped at the open, with the pound underperforming into European trade. Price action later reversed modestly after Bloomberg sources suggested that improved UK forecasts had prompted Reeves to drop the planned tax rise (see Fixed Income section for details). GBP/USD spiked from 1.3121 to 1.3200 on the Bloomberg headlines before easing back toward 1.3150, with trade contained within a 1.3109–1.3200 intraday range and inside yesterday’s broader 1.3100–1.3215 parameters.
• JPY – USD/JPY is struggling for clear direction after recent choppy trade and amid a lack of fresh domestic catalysts, while Japanese press highlights growing scepticism among market participants over the government’s ability to support the yen through direct intervention. The JPY is showing limited reaction to the broader risk-averse tone, with sentiment further dampened by sharp remarks from China’s Defence Ministry, which warned that Japan “will only suffer a crushing defeat” should it “dare to take a risk.” The comments followed Japanese PM Takaichi’s statement that a conflict over Taiwan could constitute a “survival-threatening situation” for Tokyo. USD/JPY trades within a 154.32–154.74 intraday range, contained inside yesterday’s 154.13–155.02 parameters.
• Antipodeans – The Antipodeans are mixed with NZD leading gains despite limited fresh catalysts, after the RBNZ confirmed it will proceed with easing mortgage loan-to-value ratio restrictions as previously announced last month. AUD/USD briefly moved above its 100DMA (0.6540) before pulling back, while NZD/USD recovered strongly from yesterday’s losses. The AUD/NZD cross meanwhile slipped from a 1.1558 high to a 1.1487 low.

Fixed Income

• Gilts – A volatile session, with the benchmark plunging from 93.37 to 92.07 at the lows (down 130 ticks) before rebounding to trade around 92.60, still lower by ~77 ticks. Yields briefly spiked to 4.57% (10yr) and 5.37% (30yr). The initial selloff followed FT reports that Chancellor Reeves plans to scrap the manifesto-breaching income tax rate hike, opting instead for threshold cuts and smaller levies — moves seen as undermining fiscal credibility. The reversal prompted renewed concerns over the government’s fiscal stability and added political pressure on PM Starmer. Gilts later pared losses after Bloomberg reported the U-turn was driven by improved UK growth and wage forecasts, lifting the benchmark nearly 50 ticks. ITV’s Peston added that the new plan includes a two-year extension of threshold freezes and lower entry points for the 40p/45p bands, underpinned by stronger wage-driven revenue projections. Despite partial recovery, markets remain uneasy over the handling of communications and credibility risks. The yield swing trimmed the odds of a December BoE cut to under 75% (from ~85% earlier in the week), particularly as higher wage growth reinforces inflation concerns within the MPC’s divided board.
• USTs – Softer in early Europe, with the benchmark slipping to a 112-19 low before stabilising near 112-22, down around 2+ ticks, as US futures found support amid improved chip-sector sentiment. Newsflow was light, with focus on US government bureaus resuming operations and expected to release updated data schedules—potentially as soon as today—setting up a catch-up-heavy week ahead. Attention remains on the December Fed meeting, where markets are split roughly 50/50 on a rate cut, leaving upcoming delayed data pivotal for near-term policy expectations.
• Bunds – Weaker, down around 23 ticks at 128.69, trading between USTs and Gilts in relative terms. The benchmark fell to a 128.63 low (off 29 ticks at worst) after Germany’s defence ministry unveiled its 2026 Bundeswehr funding plan, followed by the Bundestag fiscal committee’s approval of a total package roughly EUR 4bln above the prior figure. Reports indicate net new borrowing for 2026 at EUR 98bln (vs EUR 89.8bln in the draft), explaining Bunds’ mild underperformance versus Treasuries. The full Bundestag vote is scheduled for November 28th.

Commodities

• Crude Oil – Firmer after prices surged in APAC trade on reports of a Ukrainian strike on a Russian oil depot and Kyiv confirming active air defences amid a large-scale attack. WTI and Brent spiked around USD 2/bbl to peaks of USD 60.65 and USD 64.86, before easing to USD 59.26 and USD 63.56 respectively. Later, the UKMTO reported an incident off UAE’s Khor Fakkan, believed linked to state activity, shortly after Reuters cited sources saying an Iranian force redirected a Talara tanker toward its coast near the Strait of Hormuz, prompting a fresh USD 1/bbl uptick. Separately, Sky News Arabia reported the IDF preparing a limited offensive in Lebanon against Hezbollah.
• Precious Metals – Mixed, with XAU unchanged and XAG +1.0%. Spot gold held in a USD 4159–4211/oz range through APAC and early Europe, consolidating after several Fed officials suggested limited scope for further cuts, while Kashkari said he did not support the latest move. The simultaneous drop in equities and gold on Thursday has raised concern that the metal’s safe-haven appeal is fading, with investors noting that gold’s strong correlation with risk aversion — which helped drive it to record highs in recent months — has weakened lately.
• Base Metals – Softer, with 3M LME Copper -0.3%, extending Thursday’s risk-off tone. The red metal held within a USD 10.86k–10.91k/t range through APAC before dipping to a USD 10.83k/t low amid continued caution in broader markets. It has since bounced modestly from session lows as sentiment stabilises.
• US President Trump administration revoked Biden-era limits on Alaska oil drilling.

Geopolitics: Iran

• Talara crude oil tanker taken towards Iranian coast by revolutionary guards based on initial assessment according to Reuters sources.
• Thereafter, UKMTO notes of incident off the coast of UAE’s Khor Fakkan, believed to be state activity; Vessel is transiting towards Iranian territorial waters
• Ukrainian drone attack damages apartment buildings and oil depot in Russian Black Sea port of Novorossiysk. 
• Ukrainian air defence units were engaged in Kyiv against what the mayor described as a massive Russian attack. 
• US Coast Guard detected and monitored a Russian military vessel operating near US territorial waters approximately 15 nautical miles south of Oahu on October 29th, according to the US Coast Guard.
• US senior military officials on Wednesday presented President Trump with updated options for potential operations in Venezuela, including strikes, according to sources cited by CBS News.
• US Defense Secretary Hegseth announces Operation Southern Spear to remove narco-terrorists from the Western Hemisphere.
• China summoned Japan’s envoy over Japanese PM Takaichi’s remarks on Taiwan and said the remarks were extremely dangerous.

US Event Calendar

• 10:05 am: Fed’s Schmid Speaks at Energy Conference
• 2:30 pm: Fed’s Logan Speaks in Fireside Chat
• 3:20 pm: Fed’s Bostic To Participate in Moderated Conversation

DB’s Jim Reid concludes the overnight wrap

It’s certainly been a volatile week in terms of sentiment with relief over the end of the shutdown vying with concerns over AI valuations and whether the Fed will cut rates again after several speakers have struck a more cautious tone this week. The S&P 500 (-1.66%) posted its worst day in over a month with a December cut probability falling sharply from around 59% at Wednesday’s close to 49% last night. Standby for a likely deluge of data next week to test this pricing in both directions.   

On those releases, yesterday we heard NEC Director Kevin Hassett say that the September jobs report might get released next week. That release should have come out on October 3, so just a couple of days after the shutdown began, and the data collection for that had already been completed when the shutdown started. Then for the October jobs report (which would have normally been out on November 7), Hasset said on Fox News that “We’re going to get half the employment report. We’ll get the jobs part, but we won’t get the unemployment rate”.

Ahead of those releases, we heard from a few Fed speakers yesterday, who struck a cautious tone on the policy outlook. For instance, San Francisco President Daly said that she had “an open mind” on the decision in December. Cleveland Fed President Hammack said “we’ve got this persistent high inflation that is sticking around”, and that getting inflation “back to 2% is critical for our credibility, and that’s our objective”. St Louis Fed President Musalem (a voter this year) noted that “We need to proceed and tread with caution, because I think there’s limited room for further easing”. And Minneapolis Fed President Kashkari suggested that he didn’t support the Fed’s last rate cut in October and that he was undecided on December. So regional Fed presidents not sounding like they are rushing into rate cuts, and futures dialled back the likelihood of a December cut to 49% by the close, down from 59% the previous day.

Clearly, it’s this upcoming wave of data that will help determine whether we actually get a December cut, but there was a clear market reaction to that Fedspeak in the meantime. US equities lost ground across the board, with the S&P 500 (-1.66%) slumping after a run of 4 consecutive gains. The decline was driven by the more cyclical sectors, with the NASDAQ (-2.29%) and the Magnificent 7 (-2.69%) posting even larger declines led by Nvidia (-3.58%) and Tesla (-6.64%). Epitomising yesterday’s struggles for momentum stocks, Robinhood Markets (-8.61%) was the worst performer in the S&P 500 after unveiling a cash delivery service. Still, its shares are up +226% year-to-date. Meanwhile, Walt Disney (-7.75%) was the third worst-performer in the S&P after its Q4 revenue missed estimates. While defensive sectors fared less badly, the equal-weighted S&P 500 (-1.18%) also saw its worst day since the US-China trade escalation five weeks ago.

Rising volatility saw the VIX index (+2.49pts) spike back to exactly 20.0 at the close, with many other asset classes also struggling. Bitcoin (-3.08% to $98,756) fell to its lowest level since early May, extending the decline from its early October peak to -21%. Credit spreads widened, with US IG and HY +1bps and +8bps wider respectively. And historical safe havens of gold (-0.57%) and the dollar (-0.34%) weren’t spared either.

This backdrop also weighed on US Treasuries, with yields rising as investors priced in fewer rate cuts. For example, if we look at the December 2026 meeting, investors were pricing in 81bps of cuts by the close, down -1.8bps on the day. So it wasn’t just the next meeting that was being priced in a more hawkish direction. In turn, that pushed yields higher, with the 2yr yield (+2.2bps) moving up to 3.59%, whilst the 10yr yield (+5.0bps) was up to 4.12%. Long-end Treasuries weren’t helped by a softish 30yr auction that saw $25bn of bonds issued +1.0bps above the pre-sale yield, leaving 30yr yields +4.8bps higher on the day. US yields are back down around a basis point across the curve in Asia this morning.
Earlier in Europe, markets followed a very similar direction to the US, with equities and bonds both selling off. In the UK, sentiment wasn’t helped by an underwhelming GDP report, which showed Q3 GDP growth at just +0.1% (vs. +0.2% expected), whilst the major equity indices lost ground across the continent. So the STOXX 600 (-0.61%) fell back after a 3-day run of gains, with the FTSE 100 (-1.05%) and the DAX (-1.39%) leading the declines. And sovereign bond yields moved consistently higher too, with those on 10yr bunds (+4.4bps), OATs (+3.9bps) and BTPs (+4.8bps) all rising.

Here in the UK, sterling is trading -0.39% lower this morning after the FT reported late last night that Prime Minister Keir Starmer and Chancellor Rachel Reeves have ditched plans to increase income tax rates with the budget announcement on November 26. The politics of breaking a manifesto pledge are seemingly forcing their hands if the story is correct. Gilts have outperformed recently on the expectations of significant tax rises in the budget so this could bring some reversal of that.

Asian markets are weak this morning, following on from the US losses with weak monthly China data also a focus. As I check my screens, the KOSPI (-3.51%) is experiencing the most significant losses, followed by the Nikkei (-1.70%), the S&P/ASX 200 (-1.37%), the Hang Seng (-1.36%), the CSI (-0.81%), and the Shanghai Composite (-0.25%). S&P 500 (+0.03%) and NASDAQ 100 (-0.01%) have actually stabilised this morning.

Turning our attention back to China, industrial production increased by +4.3% year-on-year in October, which was below expectations and a decrease from a three-month high of +6.5%, as local manufacturers contend with weak domestic demand and trade tensions with the US. This represents the slowest growth in industrial production since August 2024. Simultaneously, retail sales rose by +2.9% year-on-year in October, surpassing market expectations of +2.7% but down from the 3.0% increase observed in the previous month. In a separate report, new home prices fell by -0.45% month-on-month in October, marking the steepest monthly decline in a year, which underscores the persistently weak demand in the beleaguered property sector which may require additional policy support. This follows a -0.41% decrease in September. September and October are typically peak sales periods.

In the commodities market, Brent crude prices surged above $64 per barrel overnight before retracting some gains to close +1.48% higher, settling at $63.94 per barrel all due to supply concerns following a Ukrainian drone strike on an oil depot in the Russian Black Sea port of Novorossiysk, a key export hub. 

To the day ahead now, and data releases include the second estimate of Q3 GDP in the Euro Area, and the final October CPI reading for France. Otherwise, central bank speakers include the ECB’s Escriva, Vujcic, Elderson and Lane, along with the Fed’s Schmid, Logan and Bostic.

Authored by Aldgra Fredly via The Epoch Times,

A federal judge ruled Nov. 13 that hundreds of illegal immigrants held by ICE in Illinois may be released on bond and ordered the Department of Homeland Security (DHS) to assess whether they pose any safety risk to the public.

U.S. District Judge Jeffrey Cummings of the Northern District of Illinois issued the ruling in response to a lawsuit filed by the National Immigrant Justice Center (NIJC) and the American Civil Liberties Union (ACLU) of Illinois on behalf of people arrested during “Operation Midway Blitz,” a federal immigration enforcement operation targeting illegal immigrants.

More than 3,000 illegal immigrants were arrested between June and October, including those arrested in connection with the operation, according to court documents.

Among them, 615 individuals were not subject to mandatory detention and did not have final removal orders, the ruling states. DHS had argued that all of those detained in the operation fell under mandatory detention.

The judge rejected this argument and ordered DHS to release, by Nov. 21, those individuals from the group of 615 who are still in custody and not deemed a “high public safety risk,” on a $1,500 bond and into ICE’s Alternatives to Detention program.

Their deportation proceedings would be put on hold until the next business day following their release, Jeffrey said.

“Plaintiffs assert that many class members are choosing to voluntarily depart to escape the unsafe and unsanitary conditions that they have been subjected to while in ICE operation,” Jeffrey said in his ruling.

The judge also ordered the department to immediately release 13 individuals who were arrested by ICE in violation of the consent decree during the operation.

Jeffrey noted that DHS must also provide the plaintiffs’ counsel with the names and threat levels of all individuals arrested since June, no later than Nov. 19, according to the ruling.

Mark Fleming, associate director of litigation at NIJC, praised the ruling, saying the judge’s decision will ensure detained illegal immigrants have a fair chance at due process.

“Communities throughout the Chicago area have been traumatized by ICE and other federal agents’ chaotic and violent actions in our neighborhoods in recent months, and potentially hundreds of families already have been permanently separated as a result of unlawful arrests and rapid deportations without due process,” Fleming said in a statement.

The Trump administration has said that Operation Midway Blitz targeted the “worst of the worst” illegal immigrants with criminal records, including sexual and gang-related offenses.

In a statement provided to media outlets, DHS spokeswoman Tricia McLaughlin condemned the ruling.

“At every turn, activist judges, sanctuary politicians, and violent rioters have actively tried to prevent our law enforcement officers from arresting and removing the worst of the worst,” McLaughlin said. “Now an activist judge is putting the lives of Americans directly at risk by ordering 615 illegal aliens be released into the community.”

Illinois State Police stand guard as people protest in front of the Broadview ICE Detention Facility in Broadview, Ill., on Oct. 11, 2025. NTD

Operation Midway Blitz sparked protests outside an ICE facility in Chicago, where protesters clashed with federal agents and rammed vehicles of federal agents.

President Donald Trump authorized the deployment of National Guard troops to Illinois to protect federal assets.

A federal judge blocked the deployment on Oct. 9, and the administration has filed a request with the Supreme Court, which is weighing whether to pause the judge’s injunction.

Submitted by Charles Kennedy of OilPrice

Nearly a third of Russia’s current seaborne oil export potential is now stuck in tankers as the U.S. sanctions upend crude flows and Russia’s top buyers, China and India, are still struggling to assess the implications of the sanctions, according to JPMorgan.  

“Russia’s oil exports are entering a new phase of disruption as sanctions targeting Rosneft and Lukoil are set to take effect, prompting its two largest customers — India and China — to sharply reduce their December purchases,” the Wall Street bank said in a note, as carried by Reuters.

According to JPMorgan’s estimates, as many as 1.4 million barrels per day (bpd) of Russian crude oil, or nearly a third of its exporting potential, are on tankers at present, amid re-routing and slowed unloading as buyers are hesitant following the U.S. sanctions on Russia’s top oil producers and exporters, Rosneft and Lukoil. 

Due to the sanctions, the discount of Russia’s flagship crude Urals to Brent has widened in recent days to the highest this year at $20 per barrel. 

As of Monday, Urals was priced $19.40 per barrel below Brent on a free-on-board (FOB) basis at the Russian Baltic Sea port of Primorsk and at the port of Novorossiysk on the Black Sea, widening from $13-$14 per barrel discount at the beginning of November, an industry source told Russian daily Kommersant earlier this week, citing data by Argus.  

All but two Indian refiners have skipped placing orders for Russian crude for December after the U.S. sanctioned Rosneft and Lukoil, sources with knowledge of the purchases told Bloomberg earlier this week.  

In China, major state-owned refiners have reportedly suspended purchases of Russian crude oil, but the independent refiners in the Shandong province, the so-called teapots, are unlikely to halt imports of the cheap crude that has become a staple for their refineries. 

Authored by Charles Kennedy via OilPrice.com,

Oil prices jumped in early Asian trade on Friday morning as markets responded to renewed Ukrainian attacks on Russia’s energy infrastructure. A Ukrainian drone attack on the Russian Black Sea port of Novorossiysk, one of the country’s most significant oil export hubs, triggered renewed fears of supply disruptions.

At the time of writing, WTI had risen 2.71% to $60.30…

The attacks damaged a ship, nearby apartment buildings, and an oil depot, injuring three crew members aboard the vessel, Russian regional authorities confirmed.

Ukrainian forces have increasingly targeted Russian oil-refining, storage, and export infrastructure using drones and missiles.

The campaign has gained intensity in recent months, with the Center for European Policy Analysis noting a shift in strategy “from smaller-scale strikes on storage tanks to targeting hard-to-replace refinery equipment, like cracking units, much of it western-made and subject to sanctions.”

“The intensity of these attacks has increased, it’s much more often. Eventually they could hit something that causes lasting disruption,” said Giovanni Staunovo, commodity analyst at UBS.

If Ukraine continues to press its deep-strike campaign and Russia faces rolling or compounding infrastructure losses, the supply risk to global oil markets could rise meaningfully.

Russian oil supply is being further suppressed by renewed U.S. sanctions, most notably new restrictions on Russian oil majors Rosneft and Lukoil, effective Nov. 21, prohibiting transactions with the companies as Washington increases pressure on Moscow.

The broader oil market outlook, however, remains bearish, with U.S. crude inventories rising and multiple warnings of a severe glut in 2026.

And just like that we’re free from climate hysteria and worried about a new “ice age”…Funny how that works, isn’t it? 

A new study in Communications Earth & Environment warns that a key Atlantic current could near collapse within decades, potentially triggering an “ice age” scenario and major sea-level rise, according to the NY Post.

The research, from the Chinese Academy of Sciences’ Institute of Oceanology and UC San Diego, focuses on the Atlantic Meridional Overturning Circulation (AMOC), the “conveyor belt of the ocean” that includes the Gulf Stream and helps keep Europe, the U.K., and the U.S. East Coast relatively mild.

The Post writes that the study argues that warming temperatures are melting the Greenland ice sheet, sending freshwater into the North Atlantic and slowing the AMOC. Researchers say they’ve detected a related “distinctive temperature fingerprint” several thousand feet below the surface.

“Here we identify a distinctive temperature fingerprint in the equatorial Atlantic that signals the Atlantic Meridional Overturning Circulation change,” they wrote, adding that its “robust physical mechanism and reliable detection make [this fingerprint] a valuable metric for AMOC monitoring in a warming climate.”

Using the MITgcm climate model and ocean data back to 1960, the team concludes the AMOC has been weakening since the late 20th century and could collapse before 2100. If that happened, Europe could face drastic cooling — possibly nearly 60 degrees — and drier conditions. As Jonathan Bamber told the Daily Mail, “Winters would be more typical of Arctic Canada and precipitation would decrease, also.”

Reuters notes the AMOC last collapsed before the Ice Age ended roughly 12,000 years ago.

Via Middle East Eye

Syria has formally handed over operations of Tartus port, the second largest port in the country, to the UAE-based logistics company DP World. 

DP World officially commenced operations on Wednesday, months after signing a 30-year concession agreement worth $800m with Syria’s General Authority for Land and Sea Ports. The deal has been described as one of the largest global investments in Syria’s logistics sector in years, and aims to turn the port into an efficient trading hub. 

“We are committed to applying DP World’s global expertise to build a modern and digitally enabled port that will grow trade, create opportunities and firmly position Tartus as a key trade hub in the Eastern Mediterranean,” said Fahad al-Banna, the newly appointed chief executive of DP World Tartus. 

DP World said in a statement that it would upgrade the port’s infrastructure, expand its handling and storage capacity and invest in bulk handling systems. 

In June, Syria’s government annulled a 2019 agreement between Bashar al-Assad’s administration and the Russian company Stroytransgaz to manage Tartus. 

Damascus said the deal was terminated due to the Russian company breaching its contract, including by failing to invest a promised $500m in modernizing that port’s infrastructure. 

The government, led by President Ahmed al-Sharaa, also said in a statement at the time that the previous deal was “unfair to Syrian sovereignty”, with Syria receiving 35 percent of port revenues while Stroytransgaz got 65 percent. 

Since the fall of the Assad dynasty’s decades-long rule in December, the new administration has been aiming to re-establish economic ties with western and regional powers. 

Along with Tartus, a 30-year deal was also signed with French shipping company CMA CGM to operate Latakia port, the largest port city in the country.  

In June, US President Donald Trump issued an executive order lifting sanctions on Syria, to support the country’s reconstruction following over a decade of war. The European Union and the UK also eased sanctions. Earlier this week, Sharaa became the first Syrian president to visit the White House since the country’s independence in 1946. 

Submitted by Michael Kern of OilPrice.com,

The European Union’s development bank has decided to provide additional funds to Ukraine’s state energy firm Naftogaz to secure natural gas supply amid continued Russian attacks on the Ukrainian energy infrastructure. 

The European Investment Bank (EIB), the bank of the European Union, will extend a $147-million (127 million euros) grant to Naftogaz, according to an EIB statement carried by Reuters. 

Last month, the EIB extended a loan of $348 million (300 million euros) to Naftogaz in an urgent measure to strengthen energy resilience and replenish Ukraine’s long-term gas reserves ahead of winter. 

The loan “will secure energy supply for households and businesses, following damage to Ukrainian infrastructure caused by Russia’s ongoing attacks,” the EIB said in October. 

Russian attacks on Ukraine’s energy infrastructure intensified as temperatures began to drop in the autumn. Ukraine has discussed with G7 countries additional natural gas imports as it seeks to boost imports by 30% to offset the damage from Russian strikes on its gas infrastructure. 

Naftogaz said in early October that Russia launched another massive attack on Ukraine’s gas infrastructure. The targets were civilian facilities that supply Ukrainians with gas during the heating season.  

“As a result of this attack, a significant portion of our facilities has been damaged. Some of the destruction is critical,” Naftogaz CEO Sergii Koretskyi said.

In the past week, Naftogaz signed an agreement with Polish energy firm Orlen for the supply of U.S. LNG, and agreed with Greek company ATLANTIC-SEE to jointly work to ensure U.S. LNG supply to Europe and Ukraine through Greek LNG terminals and the Vertical Corridor. 

Separately, Ukraine’s imports of electricity from the European Union surged to a 2025 high in October as Russia intensified attacks on the power grid to wreak additional havoc as temperatures drop. 

The Russia-Ukraine war on strategic energy assets has escalated in recent weeks, with Russia targeting gas facilities and power infrastructure in Ukraine, and Ukraine increasing drone strikes on Russian refineries and key export hubs.  

At a moment the Zelensky government is suffering embarrassment and under a global spotlight for a wide-ranging corruption case related to the country’s struggling state energy sector, German Chancellor Friedrich Merz has issued some unusually strong words directed at Ukrainian leadership.

In televised remarks Thursday he revealed that he personally urged Ukrainian President Volodymyr Zelensky to get serious about curbing the flow of young Ukrainian men to Germany as they need to serve in the defense of their own homeland. Merz disclosed some of the contents of his latest call.

“In a lengthy telephone conversation today, I asked the Ukrainian president to ensure that young men in particular from Ukraine do not come to Germany in large numbers – in increasing numbers – but that they serve their country,” Merz said “They are needed there.”

German Chancellor Merz:

In a call today, I asked the Ukrainian President to ensure that young Ukrainian men do not return to Germany in growing numbers, but serve in their own country where they are needed. pic.twitter.com/4fz8bLic8J

— Clash Report (@clashreport) November 13, 2025

Within Merz’s conservative ranks there’s been growing alarm over the large numbers of fighting-age men fleeing Ukraine and into Western Europe.

Zelensky policies have enabled this, as his administration relaxed exit rules related to martial law, just months ago for the first time of the war letting Ukrainian men aged 18 to 22 leave the country. Ukrainian citizens can’t even be drafted until they are 25, under current law.

American officials have also criticized Ukraine’s policy, given in most militaries in the world, eighteen makes one eligible to be recruited.

Further, according to Politico, “Members of Merz’s ruling coalition fear that the growing presence of young Ukrainian men in Germany will be turned into a political flash point by members of the far-right Alternative for Germany (AfD) party, who criticize the government’s ongoing support for Kyiv.”

Last month The Telegraph reported “Almost 100,000 fighting-age Ukrainian men have left the country in the past two months after Volodymyr Zelensky eased departure rules, new figures show.” 

Those figures were primarily based on the Polish border guard, as the neighboring EU country shares a long border with Ukraine, and has been from the start of the war absorbing refugees and trying to maintain strict counts and records. And surely many of these young men made it to Germany and other Western European countries.

While men aged 25 to 60 can be conscripted into the military and sent to the front lines, men 24 and under still cannot. Again, this has been hugely controversial as even US members of Congress have complained that Washington is sinking billions into the war effort against Russia, and Kiev won’t even tap into its most eligible fighting-age demographic. And so the expected drain of young men from the country is happening after border restrictions were loosened by Kiev last summer.

Authored by Andrew Korybko via Substack,

Italy’s potential extradition of a Ukrainian suspect to Germany could lead to a highly publicized (and predictably politicized) trial that implicates Poland in this unprecedented attack on a fellow NATO ally.

The Wall Street Journal recently published a detailed piece about “The Nord Stream Investigation That’s Splintering Europe Over Ukraine”.

The gist is that Germany’s investigation into the Ukrainian trace, which is likely a preplanned red herring as argued here in early 2023, has already worsened ties with Poland after one of its judges refused to extradite a Ukrainian suspect.

It could soon worsen ties with Ukraine too if Italy soon extradites another one and a highly publicized (and predictably politicized) trial follows.

Germany’s Nord Stream investigation has placed it in a dilemma since it needs to pin the blame on someone for one of the largest sabotage/terrorist attacks in decades, yet it doesn’t dare look into the American trace that Pulitzer Prize-winning journalist Seymour Hersh drew attention to in early 2023. Accusing it of orchestrating this attack would risk punitive tariffs from Trump and could convince him to authorize the gradual transfer of some EUCOM infrastructure from Germany to neighboring rival Poland.

On that topic, the Ukrainian trace also conveniently implicates Poland, thus inflicting damage to its reputation.

The idea that this NATO ally played even just a passive role facilitating a third country’s attack against a “fellow” member, let alone might be trying to cover the aforesaid up after declining to extradite one of the suspects, could have real-world consequences.

Germany might rally other allies against supporting Poland in a hypothetical crisis with Russia, for example, and could even blame Poland for it.

Not only that, but Poland’s proposal for Germany to subsidize its arms industry as a form of World War II reparations could be opposed on the pretext that the long-term damage that Poland helped Ukraine inflict to Germany equals whatever Germany might have subsidized, therefore negating the request. Worsened bilateral relations could then give a boost to the conservative opposition, which dislikes Germany almost as much as it dislikes Russia, ahead of fall 2027’s next parliamentary elections.

Replacing the ruling liberal-globalist coalition, which could be achieved by allying with the populist-nationalist opposition upon complying with their demand that senior party leaders resign, would strengthen the challenge that Poland poses to German influence in the region. That’s because the Right would control the presidency and parliament, thus breaking the deadlock that’s been in place since the current coalition obtained power in December 2023 and enabling more effective policy implementation.

This outcome could still occur even without a highly publicized German trial implicating Poland in the Nord Stream attack, but it’ll make it much more likely if that happens. In such a scenario, already fractious EU and NATO unity might further weaken, with this possibly hamstringing cooperation against Russia through the “military Schengen” and other emerging multilateral frameworks. A security dilemma could also develop between them amidst their mutual adversarial perceptions and arms buildups.

Observers should remember that this is possible solely due to Germany refusing to investigate the American trace in the Nord Stream attack, instead opting to look into the Ukrainian one that also involves Poland. The public demands that someone be blamed for the spike in costs brought about by Germany being cut off from cheap and reliable Russian gas. The elite therefore decided to pin the blame on them, but it’s unclear whether they thought through the consequences touched upon in this analysis.

Authored by Pepe Escobar,

China’s innovation drive is reaching fever pitch in 2025.

Let’s cut to the chase and focus on four crucial domains.

1.The Huawei Factor

Huawei is already testing its first, self-developed EUV lithography machine capable of producing 3nm chips. Trial tests are going full blast at the research center in Dongguan, and mass production should start in 2026.

It’s impossible to overstate how much of a game-changing paradigm this Chinese breatkthrough – specifically in laser-induced discharge plasma (LDP) – is all about. It’s set to turn the seminconductor technology environment totally upside down.

The physics involved in Huawei’s LDP is fundamentally different from the method employed by the Dutch ASML’s de facto monopoly. This being China, it’s simpler, smaller and cheaper.

Huawei’s technology is bound to smash that monopoly while solidifying China’s chip independence. Talk about cost efficiency: Huawei aims to produce EUV machines at a fraction of the cost of ASML’s (around $350 million for each unit), and no less than flood China with homegrown 3 nm chips.

All that is happening after the proverbial Western “experts”, following the 2019 sanctions imposed by Trump 1.0, dictated that China would take up to 15 years to just catch up. After all, EUV technology is too deeply embedded in the Western-controlled supply chain. It was assumed that China would never be able to smash the monopoly.

Well, of course any monopoly is smashable when public-private partnerships – in academia and tech – release untold billions of dollars into R&D, rally the best minds, and focus on building an EUV eco-system from scratch.

This is not only about tech; it’s a geoeconomic and geopolitical earthquake. There was a serious debate going on across China that it would be a matter between 2 and 3 years to cut off any dependence on US/Western tech. Well, Huawei and SMIC will be moving closer to mass production of these 3 nm chips already by next year. Not hard to do the math on where the future of global chipmaking lies.

Invest In R&D And Reach Patent Heaven

Now cut to Fan Zhiyong, Huawei’s Vice-President and Minister of Intellectual Property, talking at the company’s 6th Innovation and Intellectual Property Forum this past Tuesday.

He explained how “from the brand-new HarmonyOS 6 operating system to the powerful Atlas 950 supernode, our R&D team has achieved remarkable successes. Although many leading software and hardware products are massive systems engineering projects, we are making every effort to make them open to everyone.”

Huawei conducts an innovation and intellectual property forum nearly every year, discussing the importance of open/protected intellectual property as well as promoting its Top Ten Inventions: this year they featured, among others, supernodes; the Harmony OS; foldable screens; short-range optical interconnects; and next-generation solid state drives.

There’s no secret: a lot of investment in R&D is behind all these breakthroughs. Over the past five years, Huawei has invested more than 20% of its annual sales revenue in R&D. According to the EU Industrial R&D Scoreboard 2024, Huawei is Number 6 globally in R&D expenditure.

Huawei does not see these accomplishments as leading to a “closed garden”. On the contrary: the strategy is to foment an “open industry”, including the launch of a series of new open source software and hardware.

This opennes is reflected by the fact that Huawei is one of the world’s largest patent holders. By the end of 2024, Huawei held over 150,000 valid authorized patents globally, ranging from over 50,000 Chinese patents to over 29,000 patents in the U.S. and 19,000 in Europe.

And that brings us to…

2. Total Tech Sufficiency

And of course that is centered on AI. Cut to three recent key tech moves:

A. Beijing has banned foreign AI chips in every state-funded data center across the nation. Exempted will be only a few private companies which build their own data centers.

B. Local and regional governments were encouraged and are already subsidizing the electricity bills of AI data centers. China has a key infrastructure advantage over the US: cheap and extremely abundant power – as I saw it in my recent travels in Xinjiang. That is essential to offset the cost of switching to domestic chips, a more energy-intensive operation. For example, Huawei’s AI server system – CloudMatrix 384 – consumes more energy than Nvidia’s NVL72 system.

C. Beijing is also rolling out a new, ambitious “AI Plus Manufacturing” plan, included in the broader AI Plus initiative.

Point A is ultra-pertinent because Trump 2.0 is debating whether to allow Nvidia to sell a downgraded version of its Blackwell chips to China. Nvidia’s CEO Jensen Huang is lobbying for it like there’s no tomorrow, desperate of losing the Chinese market to Huawei for good. He bombastically announced that China is only “nanosenconds” behind the US on semiconductors.

Point C is also ultra-pertinent because as we saw with the Hauwei factor, Beijing is going for no holds barred AI chip self-sufficiency.

Beijing is deploying a very clever strategy. No foreign chips in data centers means a de facto protected market to domestic chip innovators which match foreign chip performances. Talk about a massive incentive.

Li Lecheng, Minister of Industry and Information Technology (MIIT), has announced that MIIT will soon issue an “AI Plus Manufacturing” plan, focusing on rolling out AI upgrades in key industries; expanding intelligent assisted design, virtual simulation, and early defect detection; promoting brand new AI-enabled mobile phones and computers; and accelerating R&D for next-generation intel devices such as humanoid robots and brain-computer interfaces.

In a nutshell: that is how Beijing wants to implement AI in every nook and cranny of the Chinese economy. It’s a no holds barred total innovation strategy. Sanctions? What sanctions?

3. Clean Energy

This revolution is already on – with China leaping ahead of the whole collective West, installing, for instance, nearly 900 gigawatt of solar capacity, more than the US-EU combo.

Last year, China generated 1826 terawatt/hour of electricity out of solar and wind power – five times the energy equivalent of all its nuclear warheads.

Yes: that’s a certified energy superpower.

4. An Early-Warning Detection Big Data Platform

The Nanjing Research Institute of Electronics Technology – China’s number one defense-electronics center and a hub of key innovation even under US sanctions – is developing a ground-breaking “distributed early-warning detection big data platform” capable of tracking up to 1,000 missile launches worldwide in real time.

The platform fuses data from an enormous array of space-, air-, sea-, and ground-based sensors, using advanced algorithms to distinguish warheads from decoys and proceed to action across secure networks.

The system integrates literally anything: fragmented, heterogeneous data streams from multiple sources – radars, satellites, optical, electronic reconnaissance systems – no matter where they come from, and when.

Cue to the system’s integration with interceptor missiles. During the Victory Day military parade last September in Beijing, China presented a new generation of air defense and anti-ballistic missiles, including the HQ-29, capable of intercepting hostile missiles beyond the atmosphere. Call it the Chinese Dragon Dome.

These are only 4 vectors amid the concerted Chinese tech drive, one of the key themes of the next Five-Year Plan to be approved next March in the “Two Sessions” in Beijing.

Now cut to Ronnie Chan, the Chair Emeritus of the Asia Society and the chairman of its Hong Kong Centre. He’s one of those affable old-school Hong Kong elite members who’s seen it all – and capable of synthesizing what’s ahead in a sharp and sweet manner. What he said recently at a seminar organized by the Shanghai Development Research Foundation could not be more relevant.

Let’s take just three key takeaways:

1. “The Chinese people are resilient and patient. As long as domestic stability is maintained, external pressure only strengthens their endurance (…) in this China–U.S. rivalry, there will be no true winner, but the side that stands longer in the end will be China.”

2. “China’s economy has not been over-financialised, and it continues to be grounded in the real economy. Only when manufacturing is strong can a nation remain stable and resilient.”

3. “China must stay calm — neither blindly optimistic nor blindly pessimistic. China possess a vast market, a complete industrial chain, and a diligent population. As long as internal stability holds, external pressures cannot defeat it. The real opportunities ahead do not lie in real estate or finance, but in the service sector and innovation-driven real economies.”

There is no Chinese “miracle”: it’s all about planning and hard work. And now to the next stage: no holds barred innovation.