News/Markets/Policy Updates: Jan. 10, 2025
— Reuters: Biden administration today to release guidance on 45Z credit. Reuters, citing two anonymous sources, reported that the Biden administration plans to issue short-term guidance for the 45Z production credit today. Additionally, the report reiterated previous information that the Trump administration is expected to finalize the rules for the credit, which took effect on Jan. 1. The delay in releasing guidance has caused significant uncertainty in the biofuels industry. Many producers have expressed concerns about potential production shutdowns or reduced operations due to the lack of clarity on the 45Z credit. Some industry groups previously requested a one-year extension of the now-lapsed biodiesel and renewable diesel tax credit to provide stability during this transition period, but there has been no movement on the request. — The potential cost for insurers from the Los Angeles wildfires is now expected to surpass $20 billion, according to JPMorgan analysts, doubling their estimate from just a day before. The analysts warn that the total insured losses could rise even higher if the fires are not controlled and continue to spread. The overall economic losses stemming from the fires are now estimated to be close to $50 billion. At this level, the Los Angeles wildfires would become the most costly wildfire event ever for the insurance and reinsurance market. This event would significantly surpass the 2018 Butte County Camp fires, which were previously the highest insured loss wildfires in California’s history with insured losses of roughly $10 billion. — Oil prices surge amid winter demand and geopolitical tensions. Oil prices climbed over 1% on Thursday, with Brent settling at $76.92 (+$0.76, +1%) and WTI at $73.92 (+$0.60, +0.82%). The increase was driven by heightened demand for winter heating fuels, as freezing temperatures across the U.S. and Europe pushed consumption of heating oil and propane up by 113,000 barrels per day for every degree Fahrenheit below the 10-year average. Tightening supply concerns were evident, with near-term Brent futures trading at a premium to longer-term contracts. Ultra-low sulfur diesel prices also reached their highest level since October due to increased heating needs. Additionally, potential U.S. sanctions on Russia’s oil industry added to the upward pressure on prices. Analysts expect WTI to fluctuate between $67.55 and $77.95, as markets seek clarity on President-elect Donald Trump’s policies and China’s economic stimulus measures. — Supreme Court case could reshape TikTok’s future. The U.S. Supreme Court is set to hear arguments today (Jan. 10) in a pivotal case that may lead to TikTok being banned or sold. The case balances national security concerns tied to TikTok’s Chinese ownership against free speech protections. TikTok’s parent company, ByteDance, has signaled a potential contingency plan by promoting its alternative app, Lemon8, ahead of a possible TikTok removal from app stores on January 19. If enacted, the U.S. would become the first Western democracy to ban TikTok, echoing recent global scrutiny: Romania annulled its presidential election due to foreign interference concerns linked to TikTok, while Albania has already implemented a ban. — FT: Xi Jinping to send high-level envoy to Trump’s inauguration. Chinese President Xi Jinping will not attend U.S. President-elect Donald Trump’s inauguration on Jan. 20, but plans to send a high-level envoy instead, the Financial Times first reported. China’s ambassador to the U.S. and other senior Beijing officials are expected to represent China at the event. This decision was communicated to Trump’s transition team following his unprecedented invitation to Xi. The move is seen as a diplomatic gesture amid strained U.S./China relations. Trump’s invitation marks a break from tradition, as foreign leaders typically do not attend U.S. presidential inaugurations. Sending an envoy balances goodwill with maintaining diplomatic distance. Trump has pledged heavy tariffs on Chinese imports during his upcoming term, further straining relations. Tensions between Xi and Trump were prominent during Trump’s first term (2017–2021). Recent U.S. intelligence reports accused China of cyberattacks on American telecommunications companies. Analysts suggest this reflects strategic posturing: Of note: The identity of China’s envoy and any discussions at the inauguration will be closely monitored by global observers. — Trump confirms plans for meeting with Putin. President-elect Donald Trump announced that preparations are underway for a meeting with Russian President Vladimir Putin. Speaking at Mar-a-Lago during a gathering of Republican governors, Trump stated, “Putin wants to meet... we’re setting it up.” The meeting, if finalized, would occur after Trump’s inauguration on Jan. 20. Trump has expressed a desire to end Russia’s war on Ukraine before taking office, fueling concerns that any ceasefire might favor Moscow. Last month, Putin publicly signaled his willingness to engage with Trump. Addressing the possibility of hosting Putin or Chinese President Xi Jinping at Mar-a-Lago, Trump added, “To be determined... we have to get that war over with. That’s a bloody mess.” — China pressures EU to resolve ‘unfair’ trade barriers. Beijing has accused the European Union of using its Foreign Subsidies Regulation (FSR) to impose unjust trade barriers against Chinese enterprises but has avoided immediate retaliation. Instead, China has initiated talks, seeking changes to EU policies that it deems discriminatory. The EU argues the FSR ensures fair competition, investigating subsidies from non-EU governments, including those backing Chinese firms. While China claims selective enforcement, the EU maintains its actions are neutral. The dispute underscores challenges in China/EU trade relations, with declining exports and broader implications for global trade dynamics. Upshot: China continues to prioritize stabilizing ties with the EU and U.S. despite the tensions. Besides revisiting earlier targets like Kentucky bourbon and Florida orange juice, Canada is considering tariffs on nearly every U.S. export product. Prime Minister Justin Trudeau’s administration aims for a “dollar-for-dollar” response, though officials acknowledge this approach may not fully match U.S. tariffs in a worst-case scenario. Trudeau has expressed hopes of avoiding a trade war while warning of significant consequences for U.S. exporters. However, economic analysts caution that Canada’s retaliatory actions would also harm its domestic economy. — BOJ to weigh raising inflation forecast amid rising rice prices and weak yen. Bank of Japan officials are set to discuss raising inflation projections for fiscal years 2024 and 2025 at their upcoming policy meeting. The revision, according to Bloomberg, is attributed to surging rice prices and a weakening yen, though no immediate rate decision is expected. Current projections for underlying inflation hover around 2%, with potential upgrades signaling consistency above this key level. Governor Kazuo Ueda has stressed the importance of wage momentum and U.S. policy uncertainties in rate decisions, suggesting inflation alone won’t trigger a hike. The meeting, scheduled for Jan. 23-24, will carefully assess data before determining whether the benchmark rate, currently at 0.25%, should change. Private analysts predict higher inflation than official estimates, with projections of 2.2% this fiscal year. Of note: The price of rice, which surged by 63.6% in November — the highest jump on record — remains a critical factor driving inflation. — JD Vance resigns from Senate as VP-Elect. Vice President-elect JD Vance resigned from the Senate Thursday evening. Vance, 40, a lawyer, venture capitalist, and best-selling author, was elected to the Senate in 2022. Initially an anti-Trump critic, he later became a key ally and was selected as former President Trump’s running mate. His resignation temporarily reduces the GOP Senate majority to 51-47. Ohio GOP Governor Mike DeWine is expected to name a replacement soon to serve the remaining two years of Vance’s term. Lt. Gov. Jon Husted is seen as a leading contender, though his potential gubernatorial ambitions might lead DeWine to consider alternative candidates. — Senate border vote highlights Democratic shift on immigration. Senate Democrats showcased a notable shift on immigration politics as many crossed party lines to support Republican-led legislation targeting migrants accused of minor crimes. The 84-9 procedural vote marks a significant development in the 119th Congress, with Democrats joining Republicans to advance the measure, signaling a growing alignment on stricter immigration policies. The bill, which mirrors the recently passed Laken Riley Act in the House, would mandate federal detention for immigrants charged with theft-related crimes like shoplifting. Moderate Democrats, particularly those from swing states or facing re-election, were quick to back the measure. Senator Mark Kelly (D-Ariz.) called the legislation sensible but emphasized the need for amendments to improve it. Senator Raphael Warnock (D-Ga.) also supported opening the bill for debate, citing its relevance to concerns in his state. The procedural vote doesn’t guarantee final passage but reflects years of incremental shifts in Democratic immigration stances, amplified by voter sentiment and political dynamics. — Trump prepares sweeping executive orders on immigration, federal workforce, and energy. Donald Trump is planning an aggressive series of executive orders after his inauguration, targeting immigration, federal workforce policies, and energy production. Key measures include tightening border restrictions, completing unfinished portions of the border wall, initiating mass deportation mechanisms, and cutting federal funding to sanctuary cities unless they comply with immigration enforcement. The Trump administration also intends to shrink the federal workforce by implementing a hiring freeze and mandating in-person work for federal employees, led by Elon Musk, head of the Department of Government Efficiency. Challenges may arise with unionized federal workers, according to sources. In energy, Trump is set to greenlight new drilling on federal lands and issue an order halting all pending regulations proposed under President Joe Biden that have yet to be finalized. These actions highlight Trump’s focus on regulatory rollbacks and aggressive policy shifts across key areas. — Lawmakers revive push for health package previously stripped from funding bill. House lawmakers are working to restore a bipartisan health package that was cut from December’s government funding bill. Rep. Buddy Carter (R-Ga.), chair of the Health subcommittee on Energy and Commerce, is advocating for a standalone vote or inclusion in a reconciliation package to pass the legislation. The over 500-page package includes significant reforms such as regulating pharmacy benefit managers, boosting Medicare payments to doctors, and extending telehealth services. Despite bipartisan support, the package was removed following opposition from President-elect Donald Trump. Rep. Greg Murphy (R-N.C.), chair of the Doctors Caucus, expressed optimism that the bipartisan provisions could pass through a suspension vote. However, leadership is still determining the best approach to advance the measures. The stripped health provisions, including a critical fix to Medicare doctor payments, remain a priority, with lawmakers seeking ways to incorporate them into upcoming legislative opportunities. — Sen. John Fetterman (D-Pa.) has accepted an invitation to meet with President-elect Donald Trump at Mar-a-Lago. This meeting will make Fetterman the first sitting Democratic senator to visit Trump at his Florida estate since the election. Fetterman confirmed the planned meeting, stating, “That is the plan. Yes, we are going to have a conversation.” He explained his decision to accept the invitation by saying, “I’m the Senator for all Pennsylvanians — not just Democrats in Pennsylvania. I’ve been clear that no one is my gatekeeper. I will meet with and have a conversation with anyone if it helps me deliver for Pennsylvania and the nation.” The exact date for the meeting has not been finalized, but it is expected to take place before Trump’s inauguration on Jan 20. Fetterman’s willingness to meet with Trump marks a significant shift in his political stance, as he has increasingly shown openness to collaborating with the incoming administration on various issues. When asked about the purpose of the meeting, Fetterman humorously told reporters, “I’m angling to be named the pope of Greenland,” indicating that he’s approaching the meeting with a lighthearted attitude while also referencing Trump’s previous interest in acquiring Greenland. This meeting is seen as a notable political development, potentially signaling a change in how some Democrats are approaching Trump’s upcoming second term. — NWS weather: Critical fire weather conditions will continue across Southern California through at least this morning... ...A significant winter storm will continue to bring heavy snow and disruptive ice across much of the South through Saturday morning... ...Pacific Storm to bring lower elevation rain/mountain snow to the Pacific Northwest...Great Basin and Rockies through Saturday. KEY DATES IN JANUARY 10: Bureau of Labor Statistics December employment situation report |
