“The spectre of a wider conflict in the Middle East poses a fresh threat to the global economy just as the world emerges from shocks triggered by Covid-19 and the Ukraine war, finance ministers and officials have warned…
“If we are facing any escalation or extension of the conflict to the whole region we will face big consequences,” Bruno Le Maire, France’s finance minister, told the Financial Times, adding that risks ranged from higher energy prices stirring inflation, to a decline in confidence…
“On the other side of the Atlantic, Jamie Dimon, chief executive of JPMorgan, called this “the most dangerous time the world has seen in decades”.”
“Western capitals urge restraint in private discussions with Israel…
“…privately the messaging has shifted to focus on containing the war to prevent it escalating into a broader regional conflict. There are fears that a new front risks being opened on Israel’s northern border with Hizbollah, the powerful Iran-backed Lebanese militant movement, as well as the dangers of an explosion of violence erupting in the occupied West Bank.”
“Netanyahu tells his forces Israel is with them as the ‘fateful hour’ to attack Gaza Strip by land, sea and air draws near…
“Israel’s imminent invasion of Gaza could turn into an occupation lasting 18 months in order to dismantle the ‘bloodthirsty monsters’ of Hamas. Rainy weather delayed the full-scale onslaught yesterday but Israel’s prime minister vowed to ‘demolish’ the terror group.”
“Gaza residents face food and water shortages as they flee south…
“Across Gaza, shellshocked residents awoke to the ninth day of a punishing war between Israel and Hamas… On Sunday, there were scant supplies of food, fuel, water and electricity in Gaza, home to 2.3 million people, and phone and internet connections were intermittent as critical infrastructure collapsed.”
“Tens of thousands rally around the world in solidarity with Palestine.
“Thousands of pro-Palestinian protesters gathered in the US capital on Saturday, marching past the White House to chants of “Free Palestine” as the death toll continued to climb in the conflict between Israel and Hamas.”
“For American Evangelicals Who Back Israel, ‘Neutrality Isn’t an Option’.
“Some evangelicals see Israel’s existence connected to biblical prophecy about the last days of the world before a divine theocratic kingdom can be established on earth… Conservative evangelicals have long formed the backbone of the Republican Party’s support of Israel.”
“US warns Iran against escalating Israel-Hamas war into regional conflict.
“The US has held back-channel talks with Iran to warn the Islamic republic against escalating the war between Israel and Hamas into a broader regional conflict, according to President Joe Biden’s top security adviser.”
“All Eyes On Iran For Security Of Oil Supply.
“”The main thing to watch for is whether Iran becomes actively involved in the conflict and the reason why is because of Iran’s proximity to the really crucial waterway called the Strait of Hormuz,” Rapidan Energy Group’s global oil service director Clay Siegle told Bloomberg this week.”
“We are one miscalculation short of a Middle East firestorm and the next world oil crisis…
“The grand bargain between the US, Israel and Saudi Arabia is already a dead letter… One can only assume that Hamas intended to provoke total conflagration… There must be a high risk that the unstoppable chain of events will trigger an assault by the Lebanese Hezbollah, backed by Iran…”
“Lebanon border fire stokes fears of regional spillover from Israel-Hamas war…
“Clashes between the pro-Iranian militants of Hezbollah and the Israeli army have grown more intense in recent days along Israel’s border with Lebanon. Over the past week, about a dozen deaths have been reported on the Lebanese side, most of them combatants but also a Reuters journalist and two civilians.”
“The Israeli defence ministry has announced that it will evacuate residents who live within two kilometres of the Lebanese border as concerns Hizbollah will enter the fray mount.
“There are 28 villages within the two kilometre zone that will be evacuated and put up in state-funded guesthouses.”
“The war between Israel and Hamas is heaping pressure on borrowing costs in neighbouring countries, as international investors grow increasingly concerned that the conflict will rapidly escalate.
“The spreads — or gaps — between the average yields on both Jordan’s and Egypt’s dollar-denominated bonds and equivalent US Treasuries have shot up this week…”
“Blinken warned lawmakers Azerbaijan may invade Armenia in coming weeks…
“Azerbaijiani President Ilham Aliyev has previously called on Armenia to open a “corridor” along its southern border, linking mainland Azerbaijan to an exclave that borders Turkey and Iran. Aliyev has threatened to solve the issue “by force.””
“Our Current Bond Crisis Should Scare You…
“Looking to history for comforting answers on the biggest bond rout in more than a century won’t provide many. Last year was in fact US bond investors’ worst year since 1871… For 2023, the year-to-date return has been almost minus 10%; annualized, that’s minus 17.3% — even worse than 2022. We are looking at bond investors’ two worst years in a century and a half.”
“Time Is Running Out for the ‘Year of the Bond’ as Losses Mount…
“At HSBC Holdings Plc, Steve Major says he was “wrong” to assume the US government’s growing supply of bonds didn’t matter. Earlier this month, Morgan Stanley finally joined Bank of America and moved to a neutral position on Treasuries. “It’s been a very, very humbling year,” Hunt said.”
“Default risks loom for nearly $2 trillion of junk-rated debt as US companies hit with higher interest rates.
“Non-investment grade US companies face growing refinancing and default risks with interest rates expected to stay high and financial conditions for borrowers tightening, according to Moody’s Investors Service. The ratings agency says about $1.87 trillion of junk-rated debt is maturing between 2024 and 2028.”
“Amid tensions with Russia, UK to deploy 20,000 troops, 8 warships to Northern Europe.
“Britain has pledged to send 20,000 troops to northern Europe next year in a drive to keep Russia at bay in the Baltic Sea and prevent sabotage of a “spaghetti” of undersea cables, the National News reported. According to the report, Prime Minister Rishi Sunak made the commitment at a summit in Sweden.”
“Gas prices have soared this week, with geopolitical volatility rattling spot markets and escalating fears of supply shortages this winter.
“Having seemingly calmed from last year’s bumper commodity rally when prices topped out at record highs following Russia’s invasion of Ukraine, Europe’s benchmarks are surging again – with the UK recording its highest prices since February.”
“The nuclear dispute driving a wedge between France and Germany…
“France and Germany’s split over nuclear power is a tale of diverging mindsets fashioned over decades, including since the Chernobyl disaster in USSR-era Ukraine. But it has now become a major faultline in a touchy relationship between Europe’s two biggest economies.”
“China’s slowdown casts pall over Xi’s Yangtze Delta project.
“…even Xi’s goal of creating a more efficiently run economic bloc and high-tech Arcadia hasn’t been spared the impact of the recent uncertainties. “As the world splits into blocks, we don’t know to what extent trade would be curtailed,” said Shanghai-based independent economist Andy Xie. “International trade drives wealth creation here.””
“China Local Governments Are Finding It No Longer Cheap to Borrow.
“China’s local authorities are finding it more expensive to sell bonds, the latest sign of rising stress as policymakers ramp up borrowings to stimulate growth and defuse short-term payment risks.”
“Evergrande bankruptcy fears spark a bank run in China.
“One of heavily indebted Chinese property developer Evergrande’s local lenders displayed this week a “cash wall” of renminbi notes at its office after depositors queued up to withdraw their deposits in what could be the front edge of a bank run crisis in China. Hundreds of people have queued up at the Bank of Cangzhou’s head office in Hebei province…”
“Rohingya face ‘second genocide’ as violence surges in Bangladesh refugee camps…
“Escalating violence in the camps and increasing repression by Bangladeshi authorities have left Rohingya refugees devoid of protection or justice. Many Rohingya have also fallen prey to armed gangs involved in smuggling drugs, human trafficking and abductions for ransom.”
“South Sudan buckles from stream of refugees fleeing Sudanese war.
“”We are calling on the world to pay more attention to what is happening in South Sudan,” said Charlotte Hallqvist, a spokesperson for the UN’s refugee agency, the UNHCR. “It’s a sad reality that it’s one of those crises that has fallen out of the media spotlight.””
“How a Fertilizer Shortage Is Spreading Desperate Hunger.
“Across Africa and in parts of Asia, disruption to the supply chain for fertilizer is raising food prices and increasing malnutrition… The breakdown in fertilizer production challenges the orthodoxy that has dominated international trade for decades. Prominent economists have promoted globalization as insurance against upheaval…”
“IMF, World Bank make desperate call for cooperation, but is anybody listening?
“As weak growth and high debt forces the Global South to cut critical spending from education to climate mitigation, the Marrakech Principles are yet another rallying call for global cooperation in a divided world that seems likely to go unheeded.”
“Break-up of world economy into competing blocs poses huge risk to human society.
“Fragmentation will mean a more divided world where essential solutions—on climate, financial crises or new pandemics—will be much harder to reach, and where the risks of conflict will be that much greater.”
“This Is What It Looks Like Right Before A Depression Starts…
“Often, the period leading up to a depression can seem deceptively stable. Markets may be booming, and the general public might be optimistic. For example, before the Great Depression, the Dow Jones Industrial Average reached an all-time high of 381.17 in September 1929. However, beneath the surface, several indicators can signal a looming economic downturn, such as rising private debt and over-leveraged financial institutions.”
You can read the previous “Economic” thread here. I’ll be back tomorrow with a “Climate” thread.
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