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The World
EU to US: We already have war, don’t give us trade war, too. Disappointment has set in two years after the election of the U.S. President. Joe Biden was supposed to reset trans-Atlantic relations with the European Union. EU leaders were debating U.S. policies that many in the 27-nation bloc see as unfairly locking a longstanding and trusted ally out of the lucrative American market. The point of contention is the U.S. Inflation Reduction Act, a $369 billion plan that favors American-made climate technology through subsidies and, according to the EU, will unfairly discriminate against its firms. They say conflict with Washington is the last thing they want, with war raging on their doorstep in Ukraine and common resolve essential in stopping Russia. But money is a threat to that unity. (Associated Press)
After months of delays, the EU and NATO are expected to soon formally issue a joint call for Russia to stop its war and leave Ukraine, and to pledge full support to Kyiv. The declaration, a draft of which was partially reviewed by POLITICO, has been in the works for more than a year but held up over tensions between Turkey and Cyprus, diplomats said. Now, a final version appears near. (Politico)
Germany got the go-ahead to buy F-35 fighter jets produced by U.S. defense giant Lockheed Martin as part of military procurement projects worth 13 billion euros ($13.85 billion). (Reuters)
The Fed approved an interest-rate increase of 0.5 percentage point and signaled plans to keep raising rates at its next few meetings to combat high inflation. The decision marked a step down after four consecutive larger increases of 0.75 point and raised the benchmark federal-funds rate to a range between 4.25% and 4.5%, a 15-year high. Fed Chair Jerome Powell suggested the central bank would strongly consider dialing down the size of rate rises to a more traditional quarter-percentage-point increment at its next meeting on Jan. 31-Feb. 1. (Wall Street Journal)
Fed's Powell says inflation battle not won, more rate hikes coming. (Reuters)
The pivot to smaller rate rises is likely to be followed internationally, with the European Central Bank and the Bank of England both poised to increase borrowing costs by half a percentage point today. Economists say inflation has peaked in all three regions, with reductions in the headline rate in the US and UK this week, but central banks remain worried that it will take too long to fall towards their 2% targets. (Financial Times)
Xi Jinping Doubles Down on His Putin Bet. ‘I Have a Similar Personality to Yours.’ The Chinese leader has long admired Vladimir Putin. Now, he is strengthening ties between the two nations with increased trade and energy partnerships. The plan includes increasing Chinese imports of Russian oil, gas and farm goods, more joint energy partnerships in the Arctic and increased Chinese investment in Russian infrastructure, such as railways and ports. (Wall Street Journal)
The Biden administration is set to put chipmaker Yangtze Memory Technologies on a trade blacklist, in the latest US effort to target Chinese technology companies that it believes threaten its security. (Financial Times)
‘A permanent home’: why a wave of wealthy Chinese is moving to Singapore. Singapore is becoming a magnet for Chinese professionals and the wealthy who want to flee economic and Covid problems at home. (South China Morning Post)
Covid cases explode in Beijing leaving city streets empty and daily life disrupted: Empty streets, deserted shopping centers, and residents staying away from one another are the new normal in Beijing – but not because the city, like many Chinese ones before it, is under a “zero-Covid” lockdown. This time, it’s because Beijing has been hit with a significant, and spreading, outbreak – a first for the Chinese capital since the beginning of the pandemic, a week after leaders eased the country’s restrictive Covid policy. (CNN)
Denmark’s first coalition between left and rightwing parties since the 1970s will cut a public holiday to boost defense spending, increase the country’s climate ambitions and reduce taxes for most high earners in a historic agreement. (Financial Times)
Drought emergency declared for all Southern California: As California faces the prospect of a fourth consecutive dry year, officials with the Metropolitan Water District of Southern California have declared a regional drought emergency and called on water agencies to immediately reduce their use of all imported supplies. (Los Angeles Times)
A California law that prohibits new oil and gas wells from being drilled near homes, schools and hospitals could face a referendum in the 2024 election. Stop the Energy Shutdown, a campaign organized by oil and gas industry groups, said it has collected enough signatures for a referendum to overturn SB 1137, the law that banned new oil and gas wells within 3,200 feet of highly populated places. It was signed into law by Governor Gavin Newsom in September. (Associated Press)
Growth in U.S. healthcare spending slowed to 2.7% last year after a 2020 surge in federal outlays on the pandemic. The analysis from the Centers for Medicare and Medicaid Services says national healthcare spending grew in 2021 to $4.3 trillion. Overall health spending had risen by 10.3% in 2020, and the more moderate increase last year was largely driven by a drop off in federal spending related to Covid-19. (Wall Street Journal)
Economy
The SEC voted to advance the biggest changes to U.S. stock-market rules since the mid-2000s, aiming to give small investors better prices on their trades and reduce some advantages enjoyed by high-speed trading firms. Democratic commissioners, who hold three of the SEC’s five seats, supported moving forward on each of the four proposals. Republican commissioners voiced objection to two of the measures. The proposals grew out of a review prompted by last year’s frenzied trading in GameStop Corp. They would fundamentally alter the relationships between brokerages that take investors’ orders to buy or sell securities, the high-speed traders that often handle those orders, and stock exchanges. (Wall Street Journal)
Goldman Sachs is considering shrinking the bonus pool for its more than 3,000 investment bankers by at least 40% this year, as chief executive David Solomon tries to control costs with deeper cuts than many of its Wall Street rivals. The final bonus pools at Goldman are still being decided but the prospect of the deep cuts has fed fears that the bank could face high staff turnover in the new year, according to people familiar with the matter. “I think we’re going to be worse than the Street,” one senior Goldman banker said. (Financial Times)
Texas legislators have excused Vanguard from being grilled on its investment practices at a hearing on ESG investment factors, a week after the asset management giant quit the main global financial alliance on tackling climate change. The Texas Senate Committee on State Affairs on Thursday planned to question executives from Vanguard, BlackRock and State Street over their ESG investment policies. Republican leaders in the state — the largest US oil and natural gas producer — have accused some banks and asset managers of hostility to fossil fuels. (CNBC)
China's nominal GDP is unlikely to surpass that of the U.S. in the next few decades, the Japan Center for Economic Research said in an estimate, dropping a forecast last year that the world's two largest economies would switch places in 2033. The Chinese economy will slow as a result of its stringent zero-COVID policy and stronger U.S. restrictions on exports to China, the Nikkei-affiliated think tank said. Over the long term, labor shortages stemming from the country's dwindling population will act as a drag on its economic growth, it added. (Nikkei Asia Review)
China’s retail sales tumble, but industrial production remains positive: China’s industrial production rose by 2.2% in November from a year earlier, but retail sales fell by 5.9% last month. (South China Morning Post)
The fusion industry is suddenly white-hot after U.S. lab breakthrough: With commercialization years away, investors flock to technology’s long-term clean-energy potential. Before this month’s breakthrough, the energy industry had been riding a wave of clean-tech and climate-focused investing, and fusion-based companies now stand to compete for a bigger slice of that funding. The Fusion Industry Association, an industry group based in Washington, D.C., said fusion-energy companies have raised more than $5 billion in private funding, roughly doubling the amount from a year ago. (Wall Street Journal)
A Bullish Outlook for Airlines: Over the past few years, the airline industry has faced hot-and-cold fluctuations across demand, capacity and costs. Could conditions in 2023 be just right for increased profitability? (Morgan Stanley Podcast)
Technology
The U.S. Securities and Exchange Commission on Wednesday charged eight social media influencers in a "pump and dump" trading scheme, alleging they used Twitter and Discord to manipulate stock prices and collectively gaining about $114 million in the process.According to the SEC, seven of the suspects would purposely hype up a particular stock which they already held to their combined millions of followers on Twitter and Discord, inflating its price, with the eighth suspect aiding and abetting in the scheme. They would then sell their own shares, deleting previous Discord messages and tweets to obscure any influence in fluctuating prices. (Semafor)
Battery company Redwood Materials is investing $3.5 billion in a gigantic new South Carolina recycling and manufacturing campus that will produce enough components to power a million electric vehicles. It's the latest in a wave of huge investments across America's emerging "battery belt," spurred on by new government policies and tax credits designed to promote development of a domestic EV supply chain. (Axios)
Microsoft’s climate innovation fund is betting on a battery startup valued at more than $3 billion that is trying to dramatically improve power and charging time of electric vehicles. Group14 Technologies is getting $214 million from investors—just a slice of billions in private and government cash going to make better batteries, which are essential for EVs and renewable energy, company officials said. Other investors include Oman’s sovereign-wealth fund and a climate fund backed by private-equity firm Lightrock. (Wall Street Journal)
A Chinese startup seeking to be the country’s answer to SpaceX is preparing a satellite launch that could beat Elon Musk’s company and other rivals by relying on the next generation of rocket fuel. LandSpace Technology Corp. expected to launch an uncrewed rocket that burns a combination of liquid methane and liquid oxygen to put its payload into orbit. (Bloomberg)
Elizabeth Warren is pressing Congress to adopt new bipartisan legislation which would force crypto firms to abide by the same regulations as banks and corporations in an attempt to crack down on money laundering through digital assets. The Guardian)
The US Senate voted to ban the hugely popular TikTok video-sharing app from all government-issued phones as the Biden administration considers restrictions on the Chinese-owned platform. The measure, which was approved unanimously, would have to be passed by the US House before Congress leaves for the year. (Bloomberg)
Smart Links
NYC Wants to Cut Average Commute Times to 30 Minutes as Part of Revival Plan. (Bloomberg)
UC regents approve UCLA’s move to the Big Ten. (Los Angeles Times)
Rising climate costs to challenge countries, companies in 2023. (Reuters)
France struggles to keep older workers in the labor market. (Financial Times)
Mexican Paid Vacation Doubles to Twelve Days After Bill Passed. (Bloomberg)
The Bloomberg 50: The people who defined global business in 2022. (Bloomberg)