China Escalates Economic War with U.S. in Announcing Probe of Nvidia

Syria | China stimulus & deflation | Ag focus on CR | Trump’s 2025 legislative agenda

•

December 09, 2024 08:11 AM

News/Markets/Policy Updates: Dec. 9, 2024

— Assad seeks asylum in Russia amid rebel seizure of Damascus. Bashar al-Assad, Syria’s dictator for 24 years, has reportedly arrived in Moscow after rebels, led by Abu Muhammad al-Jolani of Hayat Tahrir al-Sham, seized control of Damascus. Russia, Assad’s key ally during the Syrian civil war, has granted him asylum. Al-Jolani declared plans to make Syria “a beacon for the Islamic nation,” sparking fears of renewed conflict. The swift capitulation was partly because the conflict had decimated the economy. Of note: The government was unable to pay salaries of its soldiers, and many simply chose to give up the fight.

President Biden called the developments a moment of both opportunity and “risk and uncertainty” for Syria and said U.S. forces would maintain the counter-Islamic State mission in the country. “We are clear-eyed about the fact that ISIS will try to take advantage of any vacuum,” Biden said. “We will not let that happen.” To that end, the U.S. conducted airstrikes on 75 ISIS targets in Syria on Sunday. Axios reports the U.S. wants to make sure that chemical weapons that belonged to Bashar al-Assad’s regime in Syria don’t fall into the wrong hands.

What would it cost to rebuild Syria’s economy? A 2019 estimate put the price tag at as high as $400 billion — or several times bigger than the country’s rapidly shrinking GDP.

— South Korean president investigated for treason amid coup allegations. South Korea has imposed a travel ban on President Yoon Suk Yeol, who is under investigation for treason following a failed coup attempt on Dec. 3. Former Defense Minister Kim Yong-hyun has been arrested for allegedly aiding the coup. Despite surviving an impeachment vote, President Yoon remains in office but has stepped back from “handling state affairs,” according to the prime minister.

— China shifts to looser monetary policy to combat weak growth. The Chinese Communist Party has adopted a “moderately loose” monetary policy for the first time since 2010 to address deflation and sluggish growth. Fiscal measures include easing homebuying restrictions and a $1.4 trillion local government debt swap. The party’s annual economic conference on Wednesday will outline the economic agenda for 2025. The Politburo said it would use government spending to bolster domestic demand and help slumping property markets. The country is trying to achieve 5% annual economic growth this year.

Of note: Chinese stocks surged, and the yuan gained. Beijing is bracing for a trade war when Donald Trump takes office.

— Trump aide outlines aggressive legislative agenda for 2025. Stephen Miller, incoming deputy chief of staff, detailed plans for a swift legislative push in 2025. Speaking on Fox News, Miller emphasized completing a border-focused bill within weeks of Trump taking office, alongside immediate executive actions. Senate Republicans, including Sens. John Thune (R-S.D.) and Lindsey Graham (R-S.C.), aim to deliver full border funding by February. Miller also confirmed GOP intentions to pursue a comprehensive tax package, acknowledging potential delays due to the narrow House majority. House approval of the plan remains uncertain.

— Trump nominees: Donald Trump named Christopher Landau as deputy secretary of state, Michael Needham as counselor to the State Department, and Michael Anton as director of policy planning at the department. He also named personal attorney Alina Habba as White House counselor.

MARKET FOCUS

— Equities today: Asian and European stock markets were mixed overnight. U.S. stock indexes are pointed toward mixed to slightly lower openings. In Asia, Japan +0.2%. Hong Kong +2.8%. China -0.1%. India -0.3%.In Europe, at midday, London +0.3%. Paris +0.5%. Frankfurt flat.

The S&P 500 is on pace for back-to-back annual jumps of more than 20% for the first time since a four-year stretch that ended in 1998.

U.S. equities Friday and the week: The Dow ended with losses Friday after falling into negative territory in the morning and posted a loss for the week while the Nasdaq and S&P 500 ended higher and registered new record closes and gains for the week. For the week the Dow lost 0.6% while the Nasdaq was up 3.3% and the S&P 500 advanced 0.96%. On Friday, the Dow finished down 123.19 points, 0.28%, at 44,642.52. The Nasdaq rose 159.05 points, 0.81%, at 19,859.77. The S&P 500 was up 15.16 points, 0.25%, at 6,090.27.

The week was significant for financial markets:
• S&P 500 hits a record: The S&P 500 surged past 6,100 points for the first time, setting a historic milestone and exceeding the year-end targets set by most brokerage firms.
• Bitcoin breaks $100K: After hovering below the $100,000 mark for almost a month, Bitcoin finally surpassed this milestone, marking a key moment for cryptocurrency investors.

— Corporate world shudders: Heightened security concerns after CEO killing. The recent killing of United Healthcare CEO Brian Thompson on a Manhattan sidewalk has sent shockwaves through corporate America, sparking urgent discussions about executive safety. “Everyone’s scrambling to say, ‘Are we safe?’” noted Chuck Randolph, chief security officer at Ontic, a Texas-based threat management firm. The incident, which occurred as Thompson headed to an investor day event, has prompted businesses to reassess risks, with some increasing executive security measures and others shifting in-person events to virtual formats.

Of note: The Wall Street Journal last week reported that hours after a gunman fatally shot a United Healthcare executive, another chief executive traveling in the city heard from his head of corporate security. The question was urgent: Did the executive want additional security support this week? The company, Corteva, is a seed and pesticide supplier. The WSJ item said that like many top executives, CEO Chuck Magro prefers to travel inconspicuously in the U.S. The attack caused him and others inside the company to question those decisions. “Now, you sort of ask yourself: OK, is it too relaxed? I don’t know,” Magro said. “Every company’s going to have to look at this.”

— Oil prices ended the week lower. Brent crude fell about 3%, weighed down by easing Middle East tensions and expectations of ample supply in 2025. The recent ceasefire in Lebanon reduced oil’s geopolitical risk premium.

— Ag markets today: Corn, soybeans and wheat favored the upside while holding within relatively tight trading ranges overnight. As of 7:30 a.m. ET, corn futures were trading unchanged to a penny higher, soybeans were fractionally to a penny higher and wheat futures were mostly 4 to 5 cents higher. The U.S. dollar index was modestly weaker, and front-month crude oil futures were around 85 cents higher, as the collapse of Syrian dictator Bashar Al-Assad’s rule has the world on watch for more Mideast turmoil (see related items).

Nearby live cattle futures finished last week below the cash market, despite generally $1 to $2 higher cash cattle prices. That signals traders expect the cash strength to be short-lived as packer margins are negative and there will be holiday-shortened slaughter schedules in two of the next four weeks.

The CME lean hog index is down another 20 cents to $83.73 as of Dec. 5, falling below the October low to the lowest level since March 25. The pork cutout firmed $2.52 on Friday to $91.16, as all cuts except ribs strengthened, led by a $6.38 jump in primal bellies.

— Agriculture markets Friday and for the week:
• Corn: March corn futures surged a nickel to $4.40 and closed near session highs. That marked a 7-cent gain on the week.
• Soy complex: January soybeans closed unchanged at $9.93 3/4 but rose 4 1/4 cents on the week. January meal slid $3.60 to $283.80 and marked a weekly loss of $4.50, while January soyoil rose 66 points to 42.97 cents and rose 123 points on the week.
• Wheat: March SRW wheat futures fell 1 cent to $5.57 1/4, near mid-range and on the week up 9 1/4 cents. March HRW wheat rose 1 1/4 cents to $5.53 3/4, nearer the daily high and for the week up 13 cents. March Spring wheat futures fell 2 cents to $5.96 1/2 but rose 4 3/4 cents on the week.
• Cotton: March cotton fell 99 points to 70.11 cents and marked a 182-point weekly loss.
• Cattle: February live cattle futures fell 15 cents to $186.175, near the session low and hit a three-week low. For the week, February cattle fell $2.45. January feeder cattle futures gained 90 cents to $255.825 and near mid-range. On the week, January feeders fell $3.65.
• Hogs: Expiring December hog futures climbed 87.5 cents to $83.30 Friday. Most-active February futures advanced 97.5 cents to $87.325. That represented a weekly rise of $1.00.

— Quotes of note:

• The S&P 500 will gain 17% through the end of next year thanks to a strong economy, according to Oppenheimer Asset Management. John Stoltzfus’s new target of 7,100 makes him the most optimistic among strategists tracked by Bloomberg.

• What others say about S&P 500 in 2025. The S&P 500 has surged 28% in 2024. Strategists at some of the nation’s biggest banks are projecting more modest returns in 2025. JPMorgan Chase, Morgan Stanley and Goldman Sachs project that the S&P 500 will reach 6500 by the end of next year, a 6.7% increase from Friday’s close of roughly 6,090. Others are a little more bullish. Barclays recently raised its price target to 6600. Bank of America and Deutsche Bank expect the benchmark index to hit 6666 and 7000, respectively.

• “The acceleration of geopolitical events coupled with escalation on the macroeconomic fronts — tariffs, protectionism — it’s definitely something that has to be watched. We’re going to see a lot of volatility in markets.” — Sergio Ermotti, Chief executive officer of UBS Group via a Bloomberg TV interview.

— Women’s growing financial influence: A wealth shift underway. Women are set to control an increasing share of global wealth, driving significant changes in wealth management and philanthropy. In the U.S. alone, women are projected to manage $34 trillion — 38% of investable assets — by 2030, nearly double last year’s total and up from $7.3 trillion a decade ago, according to McKinsey. This surge is fueled by Baby Boomer women outliving men, inheritance, lucrative careers, and divorce, exemplified by MacKenzie Scott’s $40 billion fortune. However, gender disparities persist: women earn 84% of what men do and hold just 12% of c-suite roles at public companies, highlighting ongoing challenges in leadership diversity.

Market perspectives:

— Outside markets: The U.S. dollar index was slightly lower, with most foreign rival currencies stronger against the greenback. The yield on the 10-year U.S. Treasury note was firmer, trading around 4.17%, with a mostly lower tone in global government bond yields. Crude oil futures remained higher, with US crude around $68 per barrel and Brent around $71.80 per barrel. Gold and silver futures were posting solid gains, with gold around $2,679 per troy ounce and silver around $32.21 per troy ounce.

— Stronger dollar under Trump sparks concerns for U.S. companies. The dollar has surged in recent weeks as investors react to potential tariff impacts. While this strengthens the currency, it poses challenges for U.S. companies with international operations, potentially hindering earnings growth and affecting the broader market.

— Oil prices rise amid Middle East unrest following Syrian upheaval. Oil prices climbed as Brent crude approached $72 a barrel, and West Texas Intermediate (WTI) rose above $67. The increase reflects uncertainty after the collapse of Bashar Al-Assad’s regime in Syria. Assad’s fall has created a power vacuum, raising fears of increased violence and instability in the Middle East, similar to the aftermath of regime changes in Libya and Iraq.

Impact on Russia and Iran:
• Russia: The loss of Assad undermines President Vladimir Putin’s Middle East strategy, potentially jeopardizing Russian military bases in Tartus and Hmeimim.
• Iran: This marks a major setback, cutting a critical land corridor to Lebanon and challenging Iran’s regional influence.

— China’s central bank resumes gold purchases after six-month hiatus. China’s central bank resumed buying gold for its reserves in November after a six-month pause, official data by the People’s Bank of China (PBOC) showed. China’s gold holdings rose to 72.96 million fine troy ounces at the end of November, up from 72.80 million troy ounces a month earlier. But the value of China’s gold reserves fell to $193.43 billion at the end of last month from $199.06 billion at the end of October.

— The Teamsters union is giving Amazon until Dec. 15 to set dates to start negotiations for a contract for its delivery drivers and warehouse workers.

— Indonesia plans limited corn and sugar imports for 2025. Indonesia intends to import 900,000 metric tons of food-grade corn and 3.4 million metric tons of raw sugar in 2025 for industrial use, according to senior minister Zulkifi Hasan. He emphasized that these imports will consist of raw materials and not be for direct consumption. The country is aiming for food self-sufficiency within four years and has indicated it may not import rice next year, with only minor adjustments based on supply needs.

— AI revolutionizes weather forecasting. Google’s new AI tool, GenCast, has outperformed traditional meteorological models, projecting 2019 weather patterns with greater accuracy using pre-2018 data. This innovation extends forecasts by an additional five days and provides sharper predictions for extreme weather, potentially improving disaster preparedness. Competitors Nvidia and Huawei are also advancing AI-driven forecasting.

— NWS outlook: Heavy rain threat across the central to eastern Gulf Coast region today will expand and move up the East Coast late Tuesday into Wednesday morning... ...Periods of mixed rain and snow linger across interior New England through tonight... ...Snow/blizzard conditions across the northern High Plains will gradually taper off later today... ...Strong Santa Ana winds prompting critical fire danger across Southern California... ...Well above average temperatures will overspread the central and eastern U.S. as cold air surges into the western and then central U.S.

Items in Pro Farmer’s First Thing Today include:
• Grains mostly firmer in quiet start to the week
• Cattle traders take cautious stance
• Cash hog index marks new seasonal low
• Heavy rains continue in southern Brazil
• Eurozone investor morale falls to lowest in more than a year.

CONGRESS

— House Democrats block China investment restriction in defense bill. House Democrats, led by Hakeem Jeffries (D-N.Y.), prevented bipartisan language restricting U.S. investment in China from being attached to the 2025 National Defense Authorization Act (NDAA). The proposal, supported by Speaker Mike Johnson (R-La.) and Senate Majority Leader Chuck Schumer (D-N.Y.), aimed to codify a Biden executive order limiting investments in high-tech sectors in China. Johnson may now try to include the measure in a year-end continuing resolution, though challenges remain.

Of note: The House Rules Committee will meet this afternoon to consider the NDAA.

— Ag interests focus on continuing resolution (CR). A one-year 2018 Farm Bill extension, a possible increase in reference prices, and language regarding financial aid to the ag sector are all possibilities to be attached to the CR. However, some conservative Republicans say any increase in spending must be offset by budget cuts elsewhere. However, there could be enough Democratic votes to offset those House conservatives. Meanwhile, a disaster aid package including agriculture is widely expected, with the total amount still being considered.

Of note: Most expect a CR running until at least mid-March. Anything longer risks running up against mandatory spending cuts under the 2023 Fiscal Responsibility Act.

— Congressional Steering Committees set meetings. The House Republican Steering Committee will convene this week to decide contested committee chairmanships. Meanwhile, the Democratic Steering and Policy Committee plans to meet on Tuesday to deliberate on ranking members for exclusive committees, including the Budget panel.

CHINA UPDATE

— China escalates chip war with Nvidia probe. China launched an antitrust investigation into Nvidia, the leading AI chipmaker, marking a significant escalation in the ongoing U.S./China tech rivalry. Chinese state media reported that the probe focuses on Nvidia’s 2020 acquisition of Mellanox, an Israeli networking company, and its potential violation of China’s anti-monopoly laws. This investigation comes amid heightened tensions following the Biden administration’s latest restrictions on high-tech memory chip sales to China. The tit-for-tat measures now include China tightening controls on germanium and gallium exports — materials vital for chip production.

— Chinese students in U.S. advised not to leave campus for holiday, in case Trump bars returns. American universities are trying to address an outpouring of concern among anxious international students fearing ‘worst-case scenario.’ Link for details via the South China Morning Post.

— China’s deflationary concerns persist. China’s consumer prices rose at a slower pace in November, while producer price deflation persisted, despite stimulus measures. The consumer price index rose 0.2% from a year earlier, down from a 0.3% increase in October. Food prices rose the least in four months (1.0% vs .2.9% in October), driven by softer increases in both fresh vegetables and pork. China’s producer prices dropped 2.5% from year-ago, softer than a 2.9% decline in the previous month but the 26th consecutive month of producer deflation.

— China regulators tell banks to expedite offshore company listings. Regulators in mainland China and Hong Kong have told some of the world’s biggest investment banks to help speed up Chinese companies’ listings, said sources, in a bid to boost fundraising overseas and revitalize the economy. The China Securities Regulatory Commission (CSRC) in October told two meetings, attended by a total of more than 10 banks and law firms, it was working towards speeding up some approvals for offshore listings, seven sources told Reuters. In a similar move, Hong Kong’s bourse operator has also initiated one-on-one meetings with major global and Chinese banks since October to discuss how to optimize the listing process for Chinese firms, two of the sources said.

— UK pork exports to China resume, boosting industry prospects. China lifted Covid-era restrictions on unprocessed pork exports from UK processing plants, enabling major British producers to resume shipments immediately. This decision is projected to provide a significant boost to the UK pork industry. China, the UK’s largest non-EU customer, imported £180 million worth (around $230 million) of British pork in 2023.

Major producers can restart exports without delay. The restrictions, in place since 2020, impacted facilities like Cranswick’s Watton and the Brechin plant in Scotland.

The breakthrough followed top-level talks during the Foreign Secretary’s visit to China, with support from Defra and the Department for Business and Trade. Minister for Food Security Daniel Zeichner: Called it a “massive win” for producers. Trade Minister Douglas Alexander: Highlighted its role in fostering economic growth..

LIVESTOCK, NUTRITION & FOOD INDUSTRY

— Avian flu outbreaks resurface in Iowa. Highly Pathogenic Avian Influenza (HPAI) has re-emerged in Iowa, with two outbreaks reported in northwest counties:• Sioux County: A commercial chicken layer flock.• Palo Alto County: A commercial turkey flock.

These incidents are the fourth and fifth HPAI detections in Iowa for 2024, with three occurring in Sioux County.

Iowa Governor Kim Reynolds issued disaster proclamations for both counties, enabling resource deployment, regulatory waivers, and containment strategies. Affected flocks will be depopulated to prevent virus spread.

H5N1 HPAI, often deadly to domestic poultry, poses a low public health risk. Consumption of poultry and eggs remains safe when cooked to 165°F. Enhanced biosecurity is urged for poultry and dairy operations, with producers advised to monitor for symptoms and report any suspected cases promptly.

POLITICS & ELECTIONS

— Lara Trump will step down as Republican National Committee co-chair, saying she will consider replacing Sen. Marco Rubio (R-Fla.) if he is confirmed as expected as secretary of State.

KEY LINKS