Recommended Weekend Reads

February 23 - 25, 2024

Here are our recommended reads from reports and articles we read in the last week. We hope you find these useful and that you have a relaxing weekend.   And let us know if you or someone you know wants to be added to our distribution list.  Or sign-up for our Substack “Perspectives” to get our latest work:

China

• “Tracking China’s Control of Overseas Ports”  Council on Foreign Relations Interactive Report

  This interactive map tracks China’s growing maritime influence through investments in strategic overseas ports. Users can plot the location of each port and view satellite images alongside detailed information on the share of Chinese ownership, the total amount of Chinese investment, and the port’s suitability for use by the Chinese military. China operates or has ownership in at least one port in every continent except Antarctica. Of the 101 projects, 92 are active, whereas the remaining 9 port projects have become inactive due to cancellation or suspension by the end of September 2023. Reasons for cancellation or suspension include environmental concerns, souring of political relations, financial problems, and security issues raised domestically and internationally. Suspended projects, such as China’s construction of the Khalifa Port in the United Arab Emirates, could resume construction.

Latin America

• “Exporting Autocracy: China’s Role in Democratic Backsliding in Latin American and the Caribbean”  Center for Strategic and International Studies

  This report seeks to more fully enumerate the nature of China’s impact on democracy in Latin America and the Caribbean (LAC). It posits two independent but correlated mechanisms through which China contributes to democratic backsliding. First, the PRC propagates its model of authoritarian governance through its soft power engagements in media, education, and people-to-people diplomacy, as well as through its security assistance, which often features tools enabling mass surveillance and the curtailment of civil and political rights. Second, China protects regimes undergoing democratic backsliding by providing economic and diplomatic cover even as these governments become increasingly isolated from the rest of the international system, in effect extending these governments beyond their natural lifespan. Having recognized the specific risk vectors China’s engagement poses in LAC, the report seeks to articulate the beginnings of a democracy-first grand strategy for the United States to pursue. Such a strategy should proceed along the lines of the “insulate, curtail, compete” framework outlined in a previous CSIS report. 
  

  “Challenges to Sheinbaum’s Fiscal Policy”   Wilson Center’s Mexico Institute

  Claudia Sheinbaum Pardo leads the race for the Mexican presidency, yet the complex political and fiscal legacy of her predecessor, Andrés Manuel López Obrador (AMLO), represents both an advantage and a burden to her campaign. While she aims for the continuity of her mentor’s key policies in education, energy, and economic development, Mexico’s current fiscal landscape leaves doubts on how her programs might be funded, requiring careful consideration and strategic policymaking.

Economics

• “Financial Markets’ Perceptions of the FOMC’s Data-Dependent Monetary Policy”  Federal Reserve Bank of Cleveland

  Abstract: Over the past ten years, the Federal Open Market Committee (FOMC) has repeatedly emphasized that future policy is data-dependent. In this Economic Commentary, we investigate how financial markets expected future interest rates to change with the release of new data on inflation and labor market conditions. We find that the surprises in economic indicators have a stronger effect on the 2-year Treasury yield than on the expected federal funds rate to be set in the next FOMC meeting. This implies that markets understand that under the data-dependent approach, policy decisions do not heavily rely on the most recent data or short-run fluctuations but, rather, rely more on the persistent trend of the economy. In addition, we observe that expected future interest rates have become more sensitive to surprises in inflation after 2022, suggesting that the FOMC’s determination to reduce inflation has been well-understood by the markets.
  

• “Trade War and Peace: U.S. – China Trade and Tariff Risk from 2015 – 2050”  National Bureau of Economic Research Working Paper

  Abstract: We use the dynamics of U.S. imports across goods in the period around the U.S.-China trade war with a model of exporter dynamics to estimate the dynamic path of the probability of transiting between Normal Trade Relations and a trade war state. We find (i) there was no increase in the likelihood of a trade war before 2018; (ii) the trade war was initially expected to end quickly, but its expected duration grew substantially after 2020; and (iii) the trade war reduced the likelihood that China would face Non-Normal Trade Relations tariffs in the future. Our findings imply that the expected mean future U.S. tariff on China rose more under President Biden than under President Trump. We also show that the trade response to the trade war is similar to the response to the 1980 liberalization that initially granted China access to U.S. markets at NTR terms and was expected to be quickly reversed.

Energy Markets

• “Sanctions on Russia and the Splintering of the World Oil Market”  American Enterprise Institute

  After the West’s imposition of sanctions on Russia’s oil industry, there is a larger share of world oil production under sanction than at any time in decades. Sanctions impose costs on Iran, Russia, and Venezuela by forcing them to sell oil below market prices. However, sanctions also provide benefits to countries that buy cheap oil. China, India, and Turkey have been major beneficiaries of cheaper oil. Sanctions also make oil markets less efficient and more opaque. Policymakers must calibrate current and future oil sanctions to maximize cost imposition on adversaries while limiting the extent to which they make oil markets more inefficient.

European Security Policy

• “The future of European defense and security”   McKinsey & Company

  Much has been said and written about Europe’s urgent need to build up its defense capabilities.  But what does that exactly mean?  What precisely does the EU need to do and what challenges do EU governments, and the defense and security sectors face to achieve an effective level of defense?  McKinsey takes a deep dive to find those answers in this study.

Charts of the Week

How Russia Uses China to Get Around Sanctions

The Bell – a truly independent Russian economic news source – reports on how, since most leading economies placed tough sanctions on Russia following the invasion of Ukraine, Russian companies (and the Kremlin) have worked tirelessly to get around the sanctions.  And they have found China to be the best place to get much of what they need for home consumption – as well as obtaining a lot of products known as “dual purpose” items – e.g., for civilian and military use.

Russian imports from China reached a record $111 billion in 2023, according to Chinese customs data analyzed by The Bell — up 47% on 2022, and 65% higher than in 2021, the last full year before the invasion. 

High-tech goods are among the top three Chinese exports to Russia. That’s no surprise: under sanctions, many Russian companies had to find new sources of equipment, spare parts, electronics and vehicles. In 2023, Russia significantly increased its imports of computers from China, as well as compressors, machine tools and their spare parts, turbines, optical devices and other advanced manufacturing equipment. The Bell lays it out in these excellent charts below:

The Global Week Ahead

November 19 - 26, 2023

For the first time in a long time, the coming geopolitical week looks like it will be a relatively quiet one.  The ongoing battle in Gaza between Israeli Defense Forces (IDF) and Hamas will continue to be the focus as Middle Eastern leaders met with China’s top diplomat Minister Wang Yi to discuss finding a way to bring an end to the hostilities.

EU Foreign Ministers will also gather virtually to discuss the Gaza situation as the EU’s top diplomat conducts a whirlwind of meetings in the Middle East seeking to mediate.

Meanwhile, G20 leaders will gather virtually later this week to review issues discussed at the recent summit in New Delhi.  Gaza and the situation in Ukraine will dominate the agenda, as will how leaders can work together to find solutions. 

Washington has gone quiet in the US as Congress has taken the week off for the Thanksgiving holiday.  They return next week, where they will again take up efforts to finalize appropriation bills after passing another last-minute Continuing Resolution (CR) to keep the government running.

On the global economic radar screen, it is a fairly quiet week for major economic reports.  The US Federal Reserve and the European Central Bank release meeting minutes this week.  This Friday, markets will also watch PMIs from Europe, Japan, and the US.  Germany will also release Q3 GDP figures on Friday. 

Here is what else we are watching around the world this coming week:

Sunday, November 19, 2023 

Global

• Nothing significant to report.

Americas

Political/Social Events –

• Argentina holds the second round of Presidential elections.

Economic Reports/Events –

• Nothing Significant to Report.

Asia

Political/Social Events –

• Nothing significant to report.

Economic Reports/Events –

• Nothing Significant to Report.

Europe

Political/Social Events –

• Today is National Day in Monaco, celebrating the country being ruled by the Grimaldi Family, who took the throne in 1927.

Economic Reports/Events –

• Nothing Significant to Report.

Middle East

Political/Social Events –

• Nothing significant to report.

Economic Reports/Events –

• Nothing Significant to Report.

Africa

Political/Social Events –

• Nothing significant to report.

Economic Reports/Events –

• Nothing Significant to Report. 

Monday, November 20, 2023

Global

• The Emissions Gap Report 2023 will be launched by the UN Environment Programme (UNEP).  UN Secretary-General, António Guterres, will brief journalists on that report. He will be joined virtually by Inger Andersen, UNEP’s Executive Director, and Anne Olhoff, Chief Scientific Editor of the UNEP Emissions Gap Report 2023.

• The UN Security Council is scheduled to hold an open debate on the maintenance of international peace and security: promote sustaining peace through common development.

Americas

Political/Social Events –

• President Biden hosted the annual National Thanksgiving Turkey pardoning ceremony at the White House.

• The US Congress is out this week – the first time both chambers have been out for ten weeks.

• The Halifax International Security Forum is being held in Halifax, Nova Scotia.

Economic Reports/Events –

• US CB Leading Index (October)

• Brazil BCB Focus Market Readout

• Chile GDP (Q3), Current Account (Q3)

• Peru GDP (Q3)

• Uruguay Central Bank Interest Decision

Asia

Political/Social Events –

• The Marshall Islands holds parliamentary elections and a Constitutional referendum.

Economic Reports/Events –

• Taiwan Export Orders (October), Current Accounts (Q3)

Europe

Political/Social Events –

• There will be an informal video conference of EU Foreign Affairs Ministers to discuss a humanitarian pause in Gaza. This will happen as EU High Representative Josef Borrell will visit the region.

• South Korean President Yoon Suk Yeol and a business delegation will travel to Europe looking to make further inroads into the region's markets. Winning support for South Korea's bid to host World Expo 2030 in the city of Busan will also be among Yoon's top priorities.

• NATO Secretary General Jens Stoltenberg will meet the High Representative for Bosnia and Herzegovina, Christian Schmidt. He will also meet the Chairlady of the Council of Minister of Bosnia and Herzegovina, Borjana Krišto. He will hold meetings with the President of Serbia, Aleksandar Vučić, and the Prime Minister, Ana Brnabić. Later that day, Stoltenberg will travel to the Republic of North Macedonia to meet with President Stevo Pendarovski and the Prime Minister, Dimitar Kovačevski.

• The European Economic Area Council meets to discuss the functioning of the European Economic Area Agreement and economic security.

• The EU Agriculture and Fisheries Council meets to discuss the EU’s rural areas.

Economic Reports/Events –

• ECB Board Member Philip R. Lane participates in a virtual policy panel at 6th annual meeting of Central Bank Research Association’s (CEBRA) International Trade and Macroeconomic program joint with the 5th annual meeting of CEBRA’s International Finance and Macroeconomics program in Abu Dhabi, United Arab Emirates

• Bank of England Governor Andrew Bailey gives the Henry Plumb Memorial Lecture  a speech entitled “A Measure of Wheat for a Penny: Food Price Inflation in Historical Perspective.” 

• Eurozone Construction Output (September)

• Germany PPI (October), Bundesbank Monthly Report

• Greece Current Account (September)

• Slovakia Unemployment (October)

Middle East

Political/Social Events –

• Nothing Significant to Report.

Economic Reports/Events –

• Turkey Central Government Debt

• Israel Unemployment (October)

Africa

Political/Social Events –

• The G20 Compact with Africa Conference will be held in Berlin, Germany, hosted by German Chancellor Olaf Scholz.

• The East Africa Regional Tourism Expo will be held in Nairobi, Kenya. The Expo showcases the various diverse tourism opportunities in the continent.

Economic Reports/Events –

• Nothing Significant to Report. 

Tuesday, November 21, 2023

Global

• The UN Security Council is scheduled to hold consultations on peace and security in Africa and a briefing on Ukraine in the afternoon.

Americas

Political/Social Events –

• Nothing Significant to Report.

Economic Reports/Events –

• US FMOC Meeting Minutes Released, Chicago Fed National Activity Index (October), Redbook (November 18), Existing Home Sales (October)

• Canada Inflation (October), New Housing Price Index (October), CPI (October)

• Paraguay PPI (October)

• El Salvador Balance of Trade (October)

• Costa Rica Balance of Trade (October)

Asia

Political/Social Events –

• Nothing Significant to Report.

Economic Reports/Events –

• South Korea PPI (October)

• Reserve Bank of Australia Governor Michele Bullock participates in a panel discussion at the ASIC Annual Forum in Melbourne, Australia.

• Reserve Bank of Australia Payments System Board Meeting

• Hong Kong Inflation (October)

• Indonesia Current Account (Q3)

Europe

Political/Social Events –

• The EU Foreign Affairs Council (Development) to discuss to the situation in Ukraine, aid to Palestine, implementation of the Gender Action Plan III, and follow-up to the EU-CELAC Summit.

Economic Reports/Events –

• ECB Board President Christine Lagarde gives a speech at the high-level public discussion "Inflation kills democracy" on the occasion of the 100th anniversary of the currency reform in Germany in 1923 organized by the German Ministry of Finance in Berlin, Germany.

• ECB Board Member Isabel Schnabel gives a lecture at the International Economic Policy Lecture conference organized by the University of Würzburg in Würzburg, Germany.

• ECB Board Member Elizabeth McCaul participates in a talk at  the Financial and Regulatory Outlook Conference 2023: The New Monetary Order, organized by Oliver Wyman.

• UK Labor Productivity (Q3), Public Sector Borrowing (October)

• Switzerland Balance of Trade (October)

• Poland Corporate Sector Wages (October), Employment Growth (October), PPI (October)

• Slovakia PPI (October), Unemployment (September)

• Hungary Unemployment (October), Base Rate

Middle East

Political/Social Events –

• Nothing Significant to Report.

Economic Reports/Events –

• Israel Inflation Expectations (November), M1 Money Supply (October)

Africa

Political/Social Events –

• Nothing Significant to Report.

Economic Reports/Events –

• South Africa Leading Business Cycle Indicator (September)

Wednesday, November 22, 2023

Global

• A G20 Leaders’ Summit will be held virtually and will be hosted by Indian Prime Minister Narendra Modi.  The meeting will give leaders a chance to discuss successes and ongoing challenges to issues discussed at the G20 Summit in India recently.  On December 1, Brazil assumes the chair of the G20 for 2024.

• The UN Security Council is scheduled to hold consultations on the 1701 report (the situation in Lebanon).

Americas

Political/Social Events –

• Nothing Significant to Report.

Economic Reports/Events –

• US Durable Goods Orders (October), MBA Mortgage Index (November 17), Initial Jobless Claims (November 18),  Michigan Consumer Sentiment (November), Michigan Consumer Expectations (November), Michigan Inflation Expectations (November)

• Bank of Canada Governor Tiff Macklem will give a speech before the Saint John Region Chamber of Commerce in New Brunswick.

• Canada Manufacturing Sales (October), Wholesale Sales (October)

• Mexico Retail Sales (September)

• Argentina Economic Activity (September), Leading Indicator (October)

• Paraguay Central Bank Interest Rate Decision

Asia

Political/Social Events –

• Nothing Significant to Report.

Economic Reports/Events –

• Australia Westpac Leading Index (October)

• Reserve Bank of Australia Governor Michele Bullock gives a speech at the ABE Annual Dinner in Sydney, Australia

• Singapore GDP (Q3)

• Taiwan Unemployment (October)

Europe

Political/Social Events –

• The Netherlands holds parliamentary elections.  Polls suggest races are very close, and a clear winner may take time to sort out.

Economic Reports/Events –

• ECB Board Member Frank Elderson gives a  keynote speech and participates in a panel discussion at "Macroeconomic Zeitenwende: How to Achieve Monetary and Financial Stability in the Green Transition" organized by Bertelsmann Stiftung in Berlin, Germany.

• Eurozone Consumer Confidence (November)

• UK Fiscal Update (UK Chancellor Jeremy Hung will lay out tax and spending plans), CBI Industrial Trends Outlook (November)

• Italy Construction Output (September)

• Poland Retail Sales (October)

• Slovakia Consumer Confidence (November),  Current Account (September)

• Russia PPI

Middle East

Political/Social Events –

• Nothing Significant to Report.

Economic Reports/Events –

• Turkey Consumer Confidence (November)

• Egypt Current Account (Q3)

• Lebanon Inflation (October)

Africa

Political/Social Events –

• Nothing Significant to Report.

Economic Reports/Events –

• South Africa Inflation (October)

Thursday, November 23, 2023

Global

• Today is an official holiday at the UN Headquarters.

Americas

Political/Social Events –

• It is the Thanksgiving Holiday in the US. Banks and financial markets are closed.

Economic Reports/Events –

• Mexico Mid-Month Inflation (November)

• Colombia Business Account (October)

• Peru Current Account (Q3), Central Bank Monetary Policy Meeting Minutes

• Argentina Retail Sales (September)

Asia

Political/Social Events –

• Nothing Significant to Report.

Economic Reports/Events –

• Australia Judo Bank Manufacturing PMI (November), Judo Bank Services PMI (November)

• Taiwan Industrial Production (October), Retail Sales (October)

• Singapore Current Account (Q3), Inflation (October), CPI (October)

• Indonesia Central Bank Interest Rate Decision

• Sri Lanka Central Bank Interest Rate Decision

Europe

Political/Social Events –

• The EU-Canada Summit takes place through November 24 in Saint John’s, Canada.  Leaders will underscore EU-Canada's shared commitment to democratic values, multilateralism, and the international rules-based order as the bedrock of their relationship.

• The EU Education, Youth, Culture and Sports Council meets through November 24.

• Brussels Airlines plans to go on strike for an indefinite period of time.

Economic Reports/Events –

• ECB Monetary Policy Meeting Accounts

• ECB Board Member Isabel Schnabel gives a speech at the "Anniversary dinner" of Porto Business School in Porto, Portugal.

• Eurozone HCOB Manufacturing & Services PMIs(November)

• Germany HCOB Manufacturing & Services PMIs (November)

• UK S&P Global/CIPS Manufacturing & Services PMIs (November), GfK Consumer Confidence (November)

• France Business Confidence (November), HCOB Manufacturing & Services PMI (November)

• Poland M3 Money Supply (October)

Middle East

Political/Social Events –

• Nothing Significant to Report.

Economic Reports/Events –

• Saudi Arabia Imports/Exports/Balance of Trade (September)

• Israel Manufacturing Production (September), Manufacturing PMI (October)

• Turkey TCMB Interest Rate Decision

Africa

Political/Social Events –

• Nothing Significant to Report.

Economic Reports/Events –

• South Africa Central Bank Interest Rate Decision,  Business Confidence (Q4)

Friday, November 24, 2023

Global

• Nothing Significant to Report.

Americas

Political/Social Events –

• Nothing Significant to Report.

Economic Reports/Events –

• US S&P Global Manufacturing & Services PMIs (November)

• Canada Budget Balance (September), Retail Sales (September)

• Brazil FGV Consumer Confidence (November)

• Mexico GDP (Q3), Economic Activity (September),  Current Account (Q3)

• Chile PPI (October)

Asia

Political/Social Events –

• The foreign ministers of China, Japan, and South Korea are set to hold their first trilateral meeting since 2019 in Busan, South Korea. The meeting comes following delays caused by issues such as the coronavirus pandemic. The meeting will take place at a time when Seoul and Tokyo are moving closer to the U.S.

• Today is the deadline for Taiwanese presidential candidates to finalize their registration in order to run in the January 13, 2024 elections.

Economic Reports/Events –

• Japan Inflation (October), Jibun Bank Manufacturing & Services PMIs (November), Coincident Index (September), Leading Economic Index (September)

• India FX Reserves (November 17)

• Singapore Industrial Production (October)

• Malaysia Inflation (October), Coincident Index (September)

Europe

Political/Social Events –

• Nothing Significant to Report.

Economic Reports/Events –

• ECB President Christine Lagarde participates in a youth event, "Euro 20+ (Euro)pa der Zukunft" organized by the Deutsche Bundesbank in Frankfurt, Germany.

• ECB Vice President Luis de Guindos gives remarks followed by a Q&A session at XVIII Encuentro de Economia organized by Fundació Internacional Olof Palme in Barcelona, Spain.

• Germany GDP (Q3), Ifo Business Climate (November), Ifo Expectations (November)

• Poland Unemployment Rate (October)

• Hungary Unemployment (October)

• Spain PPI (October)

• Slovakia Business Confidence (November)

• Switzerland Non-Farm Payrolls (Q3)

Middle East

Political/Social Events –

• Nothing Significant to Report.

Economic Reports/Events –

• Israel Composite Economic Index (October)

Africa:

Political/Social Events –

• Nothing Significant to Report.

Economic Reports/Events –

• Nothing Significant to Report.

Saturday, November 25, 2023

Global

• Nothing Significant to Report.

Americas

Political/Social Events –

• Nothing Significant to Report.

Economic Reports/Events –

• Nothing Significant to Report.

Asia

Political/Social Events –

• Nothing Significant to Report.

Economic Reports/Events –

• Nothing Significant to Report.

Europe

Political/Social Events –

• Nothing Significant to Report.

Economic Reports/Events –

• Nothing Significant to Report.

Middle East

Political/Social Events –

• Nothing Significant to Report.

Economic Reports/Events –

• Nothing Significant to Report.

Africa

Political/Social Events –

• Madagascar will announce the preliminary results of its presidential elections. 

Economic Reports/Events –

• Nothing Significant to Report.

Sunday, November 26, 2023

Global

• OPEC+ meets to consider output production.

Americas

Political/Social Events –

• Nothing Significant to Report.

Economic Reports/Events –

• Nothing Significant to Report.

Asia

Political/Social Events –

• Nothing Significant to Report.

Economic Reports/Events –

• Nothing Significant to Report.

Europe

Political/Social Events –

• In the UK, the Booker Prize for Fiction winner will be announced in London.

Economic Reports/Events –

• Nothing Significant to Report.

Middle East

Political/Social Events –

• Nothing Significant to Report.

Economic Reports/Events –

• Nothing Significant to Report.

Africa

Political/Social Events –

• Nothing Significant to Report.

Economic Reports/Events –

• Nothing Significant to Report.

Please let us know if you or a colleague would like to be added to our distribution list.

Speaking at the Barron’s Advisor 100 Summit

September 19, 2023

It was great fun being a part of the “Morning News with Barron’s” panel today hosted by Jack Otter, Global Head of Barron’s Wealth & Asset Management Group and host of Fox Business News’s weekly “Barron’s Roundtable” show. What made it even better was to sit with Tony Crescenzi, Executive Vice President, Strategist, and Portfolio Manager at PIMCO. Tony is not only one of the most brilliant market strategists out there but also a true intellectual and student of history, not to mention an all-around wonderful guy.

This was the kick-off session to the Barron’s Advisor 100 Summit being held at the Phoenician Hotel in Phoenix, Arizona. More than 400 financial advisors and strategists are in attendance.

Our conversation covered a great deal of ground, ranging from the looming U.S. government shutdown to a host of geopolitical issues and what the Federal Reserve is likely to do going forward with regard to interest rates. Tony had some brilliant insights into the issue of liquidity many major firms are grappling with now as a result of the Dodd-Frank Act and what it means for investors.

Thank you, Barron’s for asking me to be a part of this great conference. And in particular, thank you, Jack, for your superb hosting and questioning - never any softballs, always penetrating and smart! It was really fun!