Results of Taiwans poll and ballots in the coming weeks, World Economic Forum begins this week, US launch further strikes in the Middle East, warnings of rates being stickier than expected, and looking to the week ahead.
With around half of the global population going to the polls this year, we’ve had the first ‘big’ result over the weekend, with Taiwan naming Lai Ching-te from the incumbent Democratic Progressive Party (DPP). The news was welcomed by markets, but won’t be particularly well received in Beijing, where they would have probably preferred the opposition to get into power.
The DPP are staunchly on the side of Taiwan remaining independent from China and fared better in the election than the polls would have suggested – this is being put down to a strong turnout of younger voters who have only ever known a sovereign nation – but not well enough to keep outright control of parliament, meaning they are going to have to collaborate with parties that do have differing views on China.
Beijing played the usual party line that “the general trend that the motherland will eventually and will inevitably be reunified” and the US have congratulated the winner and lauded Taiwan for “demonstrating the strength of their robust democratic system and electoral process”. Meanwhile Mr Lai has pledged to follow his predecessor’s careful balancing of the US and China by keeping strong relations with the US and not angering Beijing by formalising Taiwan’s defacto independence.
Another election over the weekend took place in the island nation of Comoros, which handed a fourth term to incumbent President Assoumani. In the coming weeks we’ve got El Salvador, Azerbaijan and Pakistan all going to the ballot box.
The World Economic Forum in Davos gets underway this week. The agenda is no doubt going to be focussing on the Middle East, where the continued escalation is having knock-on effects in shipping, as well as oil and gas prices that feed into inflation.
There’s debate as to whether Davos is still relevant and this year’s attendee list form the US is light, as well as our own PM choosing to avoid it for the second year running. In Rishi’s place, Jeremy Hunt will be attending, and it will be interesting to see whether business leaders have more time for him, or his opposition counterpart Rachel Reeves who will also be there.
In the Middle East, there’s been a further strike by US forces on Houthi targets. This follows a missile launch by Houthis at a naval destroyer, USS Laboon, but was intercepted by a US aircraft. According to some reports, despite the bombardment, only about 25% of their missile launching capacity has been taken out and the difficulty is that most of their weapons were mobile, making them easy to move and conceal.
Oil prices have risen over the last few days on concerns and Brent is trading at $80, whilst WTI is at $73 a barrel as we get going today. So far the moves have been purely speculative, as there has been no impact to supply.
As the world looks towards inflation and interest rates falling this year, JP Morgan CEO Jamie Dimon is warning that markets might find both being stickier than they currently expect: His view is that the US economic boom is being fuelled by government deficit spending and the long tail of covid stimulus. This isn’t likely to go away, as the government will have to continue to spend increased amounts on the green economy, reshoring supply chains and higher military and healthcare costs, which might lead inflation to be stickier and interest rates to stay higher than many are expecting.
Today is the first of the Republican primaries, which sees Republicans in Iowa vote on who gets their nomination to be their presidential candidate. Trump is the overwhelming favourite, with a 30-point lead over Nikki Haley, but he has cautioned that the sub-zero weather might see that lead impacted, but it would be a huge upset for Trump if it were anything other than a comfortable victory. The interesting one will be a week later, in New Hampshire, where his lead is far more slender and there is an outside chance that Ms Haley takes the win.
Last week Christine Lagarde, head of the European Central Bank, was the first high profile figure to say what many are thinking, when she said “if we learn lessons from history, from looking at the way he led the first four years of his mandate, it is clearly a threat… it is enough to look at trade tariffs, the commitment to Nato, the fight against climate change… in these three areas alone, in the past, US interests were not aligned with those of Europe”. These comments didn’t pass without criticism, but it will be interesting to see if anyone else joins her in speaking their mind or, as Trump edges closer to securing the nomination, that will silence
people who would ultimately have to work with his administration should he get back in.
Looking to the week ahead, we’ve got some inflation data from the UK and Europe on Wednesday, UK retail sales on Friday and a few things in between. With Davos kicking off and a Eurogroup meeting today, we’d expect there will be plenty of content on screens, but the underlying themes being remarkably familiar.
Have a great week.
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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.