Hello,
Here are the five things you need to know today:
UNITED STATES. Debt and diesel rattle the market.
CHINA. Trump looks poised to extend and pretend.
IRAN. More Republicans urge a pre-midterms deal.
CUBA. Another regime change ploy threatens to backfire.
ETHIOPIA. The risk of a new civil war tests the premier.
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UNITED STATES. Exhausted
Debt and diesel rattle the market.
Yields on 10-year Treasury bonds hit 5.13%, with 5-year yields above 5%, for the first time since 2007. Energy executives hit back at a proposed 90-day diesel export ban, which Morgan Stanley said would only raise domestic gasoline prices.
INTELLIGENCE. Markets are reacting to more than just diesel or a purchasing managers' index that signals not only strong employment, and thus higher rates, but supply chain bottlenecks, which an export ban would only exacerbate. The AI buildout, which has warped the current account via demand for electronics and electricity, is now warping capital, with AI firms now issuing 40% of investment-grade debt, crowding out even Scott “The House” Bessent.
FOR BUSINESS. Beyond mulling a diesel ban this week, Donald Trump has also said he may appoint an AI czar. That person is thought to be Treasury Secretary Bessent, rather than an industry figure like ex-adviser David Sacks. Insofar as AI’s role in finance (tech is now a debt play; Nvidia is now a bank; compute is now an asset class), this makes sense, but per his mixed record on Treasury buybacks and the yen, it could merely exacerbate growing imbalances.
CHINA. Swept under the red carpet
Trump looks poised to extend and pretend.
The US extended its trade truce with China to 10 January as Xi Jinping received a red-carpet welcome from Donald Trump at Joint Base Andrews. "China and the US should be partners, not rivals," Xi wrote in an embassy statement.
INTELLIGENCE. Only two other leaders have received a president’s airport welcome