Further strikes from the UK and US on the middle east, decline in US Natural Gas futures, India's stock market becomes the world's fourth largest, and Tesla CEO asks for increased voting rights.
We’ll start with the middle East, as overnight we’ve seen the US and the UK conduct joint strikes against Houthi targets in Yemen. This is the second time the UK has acted alongside the US since and the 8th time the country has been targeted since January 11.
So far strikes haven’t stopped attacks on ships in the Red Sea, but they have reduced their frequency and intensity, which the US say is a result of their capabilities being reduced by strikes.
Though there are concerns that the regional conflict is widening and dragging in other actors, the oil price hasn’t reacted as strongly as many had expected. Crude prices have risen and there are concerns that a material move higher would impact global inflation expectations, but so far traders have seemed to restrain themselves from going on a buying frenzy and oil remains firmly below the levels that we saw towards the end of last year.
From Israel: There’s been an offer made to Hamas to pause fighting for up to two months that would see the return of hostages in stages. Hamas are still holding more than 130 hostages and under the proposal would return these in phases, starting with those over 60 and in need of critical medical care, thereafter women and female soldiers would be released, followed by men under 60 and finally male soldiers and the bodies of dead hostages. For each category of hostage Israel and Hamas would agree how many prisoners would be freed from Israel for each hostage and thereafter they would negotiate the names of those prisoners to be freed.
Israel is adamant that they will not agree to release all 6,000 Palestinian prisoners, but do accept a significant number will need to be released if Hamas are to agree. There’s quiet optimism that this deal will be accepted, and the Israeli Defence Force admit that future operations in Gaza would be significantly smaller in scope and intensity after the Pause. Axios has the full story: click here to read.
US Natural Gas futures continued to see a heavy decline yesterday, having fallen close to 25% over the past week. This follows warmer weather forecasting for the rest of January and February reducing expectations of demand and Natural Gas storage remaining over 11% above the seasonal average.
On the continent, TTF gas futures dropped to half-year lows during yesterday’s session following a 11% slump last week. In a similar fashion to the US, warmer weather forecasts are expected to see a fall in demand for gas, while Storm Isha is expected to increase wind power generation. Gas storage is currently at 75% capacity across the EU.
India’s stock market cap has overtaken that of Hong Kong’s for the first time, making it the world’s fourth largest stock market. According to Bloomberg, “the combined value of shares listed on Indian exchanges reached $4.33 trillion as of Monday’s close, versus $4.29 trillion for Hong Kong”.
According to Bloomberg, this comes as India’s equity market has seen considerable growth given a “rapidly growing retail investor base and strong corporate earnings”. Meanwhile, Hong Kong’s stock market has faced considerable headwinds given wider factors in China including fragility in the property sector, the impact of zero-covid policies, and more stringent regulation. Indeed, Chinese and Hong Kong equities have shredded $6tn since their peak in 2021.
In China, investors are hoping that policymakers will deliver a stock market ‘rescue package’. Officials are considering whether to use about 2 trillion yuan, which is money held offshore by state owned corporations, to buy shares onshore and hopefully stabilise prices. Stocks are down more than 6% year to date, with the vast majority of the sell-off being foreign flows exiting the market. Share prices have stabilised on the news today and are up 0.5%. Authorities will want to take any action well ahead of Chines New Year, which starts on February 10 and welcomes the Year of the Dragon, which is said to represent good luck, strength and health.
Some corporate news that passed us by last week: Tesla CEO Elon Musk has publicly requested that Tesla increase his voting rights to 25% before he’s willing to fully push the business into AI and robotics. Mr Musk currently has around 13% voting rights, which means that if the board were to comply they’d have to either somehow introduce a dual share class – which could be tricky given its publicly traded status – or kowtow and offer him another ludicrous incentive scheme that if he delivers X they’ll give him Y – the alternative would be that he does start or use another vehicle to develop robotics and AI, which if he did so Tesla’s share price – which is already trades at a price to earnings ration of 67, compared to 45 of the largest EV maker BYD and Toyota’s at just 10 – would almost certainly suffer as a result. This kind of move being agreed to would almost certainly be without precedent.
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Thought for Thursday, House of Commons ceasefire vote decision, minutes released from Federal Reserve monetary policy meeting, geo-political update in Russia and Gaza, and looking at today's data.
Word of the week Wednesday, data indicates public sector net borrowing in surplus, this afternoons House of Commons vote for a ceasefire in Gaza, and release of FOMC policy me.eting minutes
Travel Tuesday, changes for China's property market, attacks on Red Sea Vessels cause further shipping disruption, EU defensive naval operation launched, and US propose a UN Security Council Resolution in the Middle East.
Macro Monday, update on Israel-Gaza conflict, town in Ukraine in full control of Russian forces, and pressure for creation of more public-private partnerships in the UK from insurers.
Friday Feeling, Labour take comfort in by-election results, potential for income tax cut plans to be dropped, president of European Commission speaks on European Union defence production.
Thought for Thursday, data released this morning shows UK in technical recession, Sunak's pledge for economic growth takes a blow, increasing number of MPs not looking for re-election for the Conservative party, and Labour party lead drops seven percentage points.
Word of the week Wednesday, hotter than expected US inflation, inflation data in the UK comes in double than BoE's target, US Senate agrees foreign aid package, and today's data.
Travel Tuesday, plight of US commercial real estate owners according to Bloomberg, data shows increase in UK wage growth, easing UK unemployment, and talks to revive negotiations in the Middle East.