Global geopolitical trends we’re tracking this week:
Key Dates
December 6 – UK construction PMI for November.
December 6 – Germany IHS construction PMI for November.
December 6 – Japan household spending for October.
December 6 – Australia central bank interest rate decision. The RBA is expected to hold the line here on interest rates despite surging housing prices and inflation.
December 7 – Germany industrial production for October.
December 7 – Germany ZEW economic sentiment for December.
December 7 – Euro zone GDP for Q3.
December 7 – US and Canada trade balance for October.
December 7 – Canada Ivey PMI for November.
December 7 – China imports, exports, and trade balance for November.
December 7 – Japan GDP for Q3.
December 7 – India central bank interest rate decision.
December 8 – Canada central bank interest rate decision. Will Canada follow up its early exit from QE by becoming a trail blazer on rate normalization as well? It’s definitely possible given high levels of growth and inflation at present. Whether it’s at this meeting or in early 2023, the general expectation is that the Bank of Canada will make its move before the Fed does down south.
December 8 – US crude oil inventories.
December 8 – China consumer price and producer price indexes for November.
December 9 – Germany trade balance for October.
December 9 – US initial jobless claims.
December 10 – UK GDP for Q3.
December 10 – UK trade balance for October.
December 10 – Germany CPI for November.
December 10 – US core CPI for November.
December 10 – US federal balance budget for November.
World
COVID-19 fast facts
- The omicron variant continues to spread/be identified around the world, with the global tally reaching 38 countries over the weekend, according to WHO.
- In South Africa, where omicron was first identified, cases have increased precipitously – quadrupling in just four days and seriously outcompeting the delta strain. Several instances of reinfection emerged within this case load, but the data remains anecdotal at this point.
- Another anecdotal tendency is omicron’s apparent mildness vis-à-vis previous strains. There has yet to be an omicron-related death reported in South Africa, and early impressions of the strain’s mildness there were recently echoed by health officials in Japan.
- While WHO chief scientist Soumya Swaminathan has said that omicron could quite likely rapidly displace delta as the globally predominant strain, she was less certain on its apparent mildness, urging the global community to adopt “caution, not panic.”
Africa
Uganda army enters the DRC
The Ugandan armed forces have entered the DRC with the intent of dispersing cross-border camps used by the Allied Democratic Forces (ADF) – a 1990s-era Islamist rebel movement that hitched its wagon to Islamic State in 2019. The new operation comes soon after the Islamic State claimed a string of suicide attacks in Kampala on November 16, which killed four people and wounded over 30. The military incursion comes at the request of the DRC government in Kinshasa, which has long been grappling with an ADF-led insurgency in the northeast of the country. However, the presence of Ugandan troops is sure to rekindle local memories of their atrocious actions during the Second Congo War, a fact that, if anything, could frustrate essential cooperation in the fight against the ADF.
Asia
A switch long foretold: Didi opts to ditch New York for Hong Kong
Didi Chuxing, the Chinese ride-sharing app that, through its showdown with PRC state regulators, brought long-standing tensions between US and Chinese financial regulators to a head, has announced that it will officially de-list on the New York Stock Exchange in favor for Hong Kong. The announcement had a predictable chilling effect on other Chinese tech companies and the Hang Seng itself, all of which were down considerably on Friday.
Consider this the template moving forward: the era of the US-listed major Chinese tech company appears to be at an end.
For more information, see previous situation report examining the company’s regulatory issues in China.
Is an Evergrande restructuring deal imminent?
Details of an Evergrande restructuring may be imminent, as per reporting from Bloomberg, which has brought to light an exchange filing saying the company plans to ‘actively engage’ with offshore creditors on a restructuring plan. At this point the dismantling of Evergrande is a government-led endeavor, with a team of local officials literally being dispatched to the company to help contain any potential financial contagion. Messaging has also harmonized among Party officials and regulators, who have opted for the Enron playbook of Evergrande’s woes being caused by a few bad apples rather than systemic factors. Whether the investing public believes them remains to be seen; however, in the meantime, the sector-wide real estate reckoning continues unabated.
Americas
All eyes on US inflation numbers for November
The year’s most important inflation data drops on Friday, when US consumer price data for November is published. The significance stems from its context, coming amid a string of upside surprises on inflation numbers to close out 2021, along with the looming end to the Fed’s pandemic-era bond-buying program. But the doves also have some ammunition in this policy fight: US job data came in well below estimates for November, and the omicron variant represents an unknown risk to the health of the global economy.
Earlier in the pandemic, we’d expect these uncertainties to ultimately justify a longer horizon for interest rate normalization and tapering. However, it’s worth bearing in mind two things in the present context: 1) Jerome Powell has gone on the record saying that he no longer believes that inflation is transitory in testimony to the Senate; and 2) there could be some kind of quid-pro-quo in Powell’s second nomination whereby Powell, originally a Republican nominee, has promised to address some of the Biden administration’s concerns in exchange for a second-term nod. We know this is the case for climate change; it could also be the case for a more activist stance against inflation, which the president himself stressed during his announcement of Powell’s second term.
Data Snapshot
Energy prices have plunged amid growing global uncertainty over the economic impacts of the omicron variant.
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