Early 2024 International Focus: China, Israel, Ukraine, Iran/Houthi Rebels

Employment report | FAO food price index | SEC and bitcoin | Key events in 2024

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January 01, 2024 06:35 PM

Employment report | FAO food price index | SEC and bitcoin | Key events in 2024

Washington Focus

The Senate returns Jan. 8 and the House on Jan. 9. Lawmakers’ issues are now well known, but most of them are laced with political and policy hurdles.

— This is usually one of the quietest weeks in Washington, which means international events could take center stage, which they did over the long holiday weekend as you can see in the international items in this dispatch.

— Iran dispatched a warship to the Red Sea after the U.S. Navy destroyed three Houthi boats. The Alborz destroyer traversed the Bab El-Mandeb strait, a narrow choke point between the Red Sea and the Gulf of Aden, on Monday, Iranian state media said without providing further information on the vessel’s mission.

Maersk, a prominent Danish shipping company, has once more halted its sailings through the Red Sea following an attack by Iran-backed Houthi rebels from Yemen on one of its container ships. Several shipping companies had already suspended their routes through this region in December due to security concerns. Maersk had only recently resumed its sailings on December 24.

Over the weekend, militants attempted to hijack the Maersk Hangzhou. In response, American navy helicopters destroyed three of the Houthi rebels’ attack vessels and killed ten militants. The Houthis said 10 of its members were dead or missing.

UK defense secretary Grant Shapps said on Monday that Britain was willing to take “direct action” against the Iranian-aligned group to “deter threats to freedom of navigation in the Red Sea.” Writing in the Daily Telegraph, Shapps said: “If we don’t protect the Red Sea, it risks emboldening those looking to threaten elsewhere, including in the South China Sea and Crimea.”

John Kirby, White House national security spokesman, said the U.S. was not seeking a wider conflict in the Middle East or with the Houthis. “We’re going to do what we have to do to protect shipping” he told ABC’s Good Morning America show on Sunday, adding that the U.S. had “significant national security interests in the region… We’re going to put the kind of forces we need in the region to protect those interests and we’re going to act in self-defense going forward,” Kirby said.

A Houthi delegation met with officials in Tehran after the U.S. killed several members of the militant group. A Houthi spokesperson, Yahya Saree, called on Yemenis, Arabs and Muslims to be “ready for all options in confronting the American escalation.”

— In interview, Zelenskyy expresses frustration and determination amid ongoing conflict in Ukraine. Volodymyr Zelenskyy, the President of Ukraine, is expressing frustration and determination despite facing a challenging year ahead. Based on an interview with the Economist (link), he is particularly frustrated with wavering allies and some of his fellow citizens, as Ukraine continues to grapple with conflict and uncertainty.

Zelenskyy reflects on how, in the early days of Russia’s invasion in 2022, he galvanized international support with a brief video message. However, the world’s attention has waned, and Ukraine’s struggle is met with weariness. He emphasizes that the belief that Vladimir Putin is winning is merely a perception, while Russian forces are still facing significant casualties.

He underscores that supporting Ukraine is not just about helping Ukraine but also about protecting Europe from Russian aggression. Zelenskyy warns that if Russia is allowed to take Ukrainian children, they could become emboldened to target others. He argues that the West must understand that assisting Ukraine is in its own interest and emphasizes that European nations should lobby the U.S. to support Ukraine.

Regarding peace negotiations, Zelenskyy sees no fundamental progress from Russia, only continued attacks on Ukrainian cities. He dismisses the idea of Russia seeking peace and suggests they are pausing to regroup militarily.

Ukraine’s president anticipates that the upcoming year will be crucial, with the focus shifting to the Black Sea region and Crimea. He believes that isolating Crimea and degrading Russia’s military capabilities there are essential goals for Ukraine’s defense. Success in these areas could have a significant impact both domestically and internationally.

But Zelenskyy stresses that the speed of success will depend on the military assistance Ukraine receives from Western partners. He has requested specific weapons, such as the Taurus missile, to target key Russian infrastructure.

While he maintains Ukraine’s strategic ambition to restore its original borders, Zelenskyy refrains from setting timelines or making promises regarding territorial gains. His immediate focus is on defending important cities, protecting critical infrastructure, and saving Ukraine’s eastern and southern regions.

Zelenskyy acknowledges that the high expectations created before the 2023 counter-offensive led to disappointment. He emphasizes the need for Ukraine to consider its own strength and resilience, including domestic production of military supplies. He calls for the mobilization of Ukrainian society and support from the world to confront the ongoing challenges.

Bottom line: Zelenskyy remains determined to see Ukraine through its struggles and emphasizes the importance of unity and support from allies in this ongoing conflict with Russia.

— The Securities and Exchange Commission is expected on Tuesday or Wednesday to grant regulatory approval for the launch of exchange traded funds tied to the spot price of bitcoin. BlackRock Asset Management, Fidelity, Invesco and WisdomTree Investments are among those seeking to introduce the ETFs.

— Dates for key events in 2024:

Jan. 13: Taiwan holds its presidential election in a cycle that will have outsized importance for the self-governing island’s future relationship with China.
Jan. 15-19: Global elites gather for the world’s premiere gabfest at the World Economic Forum in Davos, Switzerland.
Feb. 14: Indonesia holds its presidential election in what will be the world’s largest single-day elections.
Feb. 16-18: World leaders and national security experts gather in Munich for the annual Munich Security Conference.
April-May: India, the world’s largest democracy, holds general elections over the course of several weeks.
June 2: General elections are scheduled to be held in Mexico. Voters will elect a new president to serve a six-year term, all 500 members of the Chamber of Deputies and all 128 members of the Senate of the Republic.
July 9-11: NATO leaders convene in Washington for a major NATO summit.
Sept. 24: World leaders begin convening in New York for the UN General Assembly high-level week, as part of the General Assembly’s 79th session.
Nov. 5: Election Day in the United States.

Economic Reports for the Week

During a holiday-shortened week, investors will have an update on construction spending, manufacturing PMI numbers, the release of the minutes from the last Fed meeting, and the December jobs report on Friday. The nonfarm payrolls report is expected to show that the U.S. economy added 155,000 jobs in December, while the unemployment rate is forecast to rise slightly to 3.8%. Average hourly earnings are anticipated to cool to a month-over-month pace of +0.3%.

Monday, Jan. 1

Holiday

Tuesday, Jan. 2

PMI Manufacturing Final: The final manufacturing PMI for December is expected to come in at 48.2, unchanged from the mid-month flash and about a point lower than November’s final 49.4.
Construction spending has yet to show much effect from rising financing rates. After rising by 0.6% in October, spending in November is expected to rise by another 0.6%.

Wednesday, Jan. 3

MBA Mortgage Applications
Motor vehicle sales: Unit vehicle sales in December are expected to edge up to a 15.4 million annual rate from November’s 15.3 million which was held down by lack of inventory tied to the now settled industry strike.
The ISM manufacturing index has been in contraction the last 13 months and, at 46.7, came in weaker than expected in November. December’s consensus is not much better at 47.2.
JOLTS: October’s 8.733 million for job openings was significantly below consensus for 9.4 million and was a huge relief to Federal Reserve officials fretting about excess demand in labor markets. The consensus for November is 8.750 million, pretty much flat from October.
FOMC Minutes
Federal Reserve speaker: Thomas Barkin

Thursday, Jan. 4

Jobless claims for the Dec. 30 week are expected to come in at 217,500 versus 218,000 in the prior week.
ADP Employment Report: Forecasters see ADP’s December employment number at 115,000. This would compare with November growth in private payrolls reported by the Bureau of Labor Statistics of 150,000. ADP’s number for November was a rise of 103,000.
PMI: For the composite PMI December final, the consensus calls for no change from the 51.0 flash. The composite ended November at 50.7. For the services PMI December final, the consensus also sees no change at 51.3 from the mid-month flash of 51.3. This index ended November at 50.8.
Fed Balance Sheet
Money Supply

Friday, Jan. 5

Employment: A 158,000 rise is the consensus for nonfarm payroll growth in December versus 199,000 growth in November which was on the high side of the consensus range. Average hourly earnings in December are expected to rise 0.3% on the month for a year-over-year rate of 3.9%; these would compare with November’s higher-than-expected monthly rate of 0.4% and an as-expected yearly rate of 4.0%. December’s unemployment rate is expected to rise 1 tenth to 3.8% from November’s 3.7%, which was 2 tenths lower than expected.
Factory orders are expected to rebound 2.0% in November versus October’s 3.6% decline that reflected a downswing in commercial aircraft. Durable goods orders for November, which have already been released and are one of two major components of this report, surged by 5.4% on the month after a revised 5.1% drop in October.
ISM services are expected to hold steady at 52.7 in December from 52.7 in November which extended a nine-month run of mid-to-low 50s.
Federal Reserve speaker: Thomas Barkin

Key USDA & international Ag & Energy Reports and Events

Friday brings the UN/FAO’s food price update.

Monday, Jan. 1

Ag reports and events:

Holiday

Tuesday, Jan. 2

Ag reports and events:

Export Inspections
Cotton System
Fats & Oils
Grain Crushings
Malaysia December palm oil exports
New Zealand global dairy trade auction
Purdue agriculture sentiment
Holiday: Japan, Australia, New Zealand

Wednesday, Jan. 3

Ag reports and events:

Broiler Hatchery
Weekly Weather: State Stories
Citrus Fruits, Statistical Bulletin
Noncitrus Fruits and Nuts, Statistical Bulletin
Vegetables, Statistical Bulletin

Energy reports and events:

EIA weekly U.S. oil inventory report
Genscape weekly crude inventory report
Holiday: Japan, Russia.

Thursday, Jan. 4

Ag reports and events:

Brazil’s Conab issues production, area and yield data for corn and soybeans
Port of Rouen data on French grain exports

Energy reports and events:

EIA natural gas storage change
Weekly Ethanol Production
ICE weekly Commitments of Traders report for Brent, gasoil
Holiday: Russia, Myanmar, DRC.

Friday, Jan. 5

Ag reports and events:

CFTC Commitments of Traders report
Peanut Prices
Weekly Export Sales
Dairy Products
FAO World Food Price Index
Malaysia’s Jan. 1-5 palm oil exports

Energy reports and events:

Baker Hughes weekly U.S. oil/gas rig counts
Holiday: Russia

KEY LINKS

Policy Updates