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Britain, Canada, and the U.S. move against China

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U.S. and its allies impose sanctions against China and related technology companies, and this situation continues increasingly. Finally, besides Washington, London and Ottawa also took steps to corner Beijing.

The Federal Communication Commission (FCC) has banned the sale and import of telecommunication equipment from Huawei and ZTE in the U.S., citing concerns over “national security”. Companies to be affected by the new ban include Hytera Communications, Hangzhou Hikvision Digital Technology and Dahua Technology.

“Today, the FCC takes an unprecedented step to safeguard our networks and strengthen America’s national security,” Republican Brendan Carr, the FCC’s commissioner, said on Twitter. Stating that the decision was taken unanimously, Carr noted that for the first time in FCC history, the authorization of new equipment was prohibited on the basis of national security concerns.

The FCC voted on the order of the Secure Equipment Act signed by US President Joe Biden on November 11, 2021. The law authorises the FCC to block equipment sales by companies that pose “unacceptable national security risk”. FCC commissioner Carr had previously said that the U.S. government should ban TikTok, a social media giant owned by Chinese ByteDance.

Huawei and ZTE are one of the world’s largest suppliers of telecom equipment. Along with the U.S., Australia, Britain and Canada have also taken action against Chinese technology companies, especially Huawei. These countries had banned Huawei from supplying 5G infrastructure.

UK’s fear of cameras

The United Kingdom, an ally of the United States on the opposite side of the Atlantic, has also taken a new step and expanded its sanctions against China.

As a result of the government’s assessment of “security threats”, it was decided to restrict Chinese-made surveillance systems in “sensitive sites”, including government offices.

“In light of the threat to the UK and the increasing capability and connectivity of these systems, additional controls are required”, a key figure in the Conservative Party, Cabinet Office Minister Oliver Dowden told parliament. Dowden said the banned cameras would cover the companies subject to the national intelligence law of the People’s Republic of China.

Government departments have been advised to remove Chinese surveillance equipment. The advice suggest government departments should consider removing Chinese-based equipment outside “sensitive sites.”

The usual suspects in the UK are Chinese surveillance equipment companies Hikvision and Dahua. Speaking to Politico, a Hikvision’s spokesperson told the company cannot transmit data from end-users to third parties, does not manage end-user databases, or sell cloud storage in the U.K. 

Canada’s new Indo-Pacific strategy targets China

The United States’ northern neighbour has released the long-overdue strategy document. The plan focuses on policies in the Indo-Pacific and China is at the centre of the document.

“When it comes to our engagement with China, we’re clear: it’s about protecting our national interests without compromising our values,” said Canadian Foreign Minister Mélanie Joly, who participated in a television show.

Joly said that they will compete with China when they are obligated, and will cooperate when they are obligated. Joly cited climate change, pandemic measures and nuclear disarmament.

The strategy document sets out tasks such as repelling foreign interference on Canadian territory, protecting Canada’s access to the Chinese market, and resisting unilateral steps that would disrupt the status quo in Taiwan, the East and the South China Sea.

The document describes China as an “increasingly destructive global force” and underlines that Canada will act together with its regional and global allies, including the US.

The document says Canada plans to increase its naval force in the Indo-Pacific region, including the deployment of intelligence and security forces. The new strategy says China will stand up to Beijing in the event of human rights violations, damaging the national security of Canada or its allies in the region.

AMERICA

Fed cuts interest rates, dollar surges to two-year high

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The U.S. Federal Reserve reduced interest rates by a quarter percentage point but signaled a slower pace of easing next year. This move drove the U.S. dollar to its highest level in two years and triggered a sell-off in both domestic and international stock markets.

The Federal Open Market Committee (FOMC) voted on Wednesday to lower the benchmark interest rate to 4.25–4.5%, marking the third consecutive cut. The lone dissenting vote came from Cleveland Fed President Beth Hammack, who favored maintaining the current rates.

Officials highlighted concerns about persistent inflation, projecting fewer rate cuts for 2025 than previously expected. Reflecting these worries, policymakers also raised their inflation forecasts for the coming year. Following the announcement, Fed Chair Jay Powell remarked that the current policy settings were “significantly less restrictive,” indicating the Fed’s inclination to adopt a more cautious approach to further easing.

“This decision was a ‘closer call’ than prior meetings,” Powell noted, emphasizing that inflation trends remain “sideways” while risks to the labor market are “diminishing.”

Aditya Bhave, senior U.S. economist at Bank of America, described the Fed’s message as “unabashedly hawkish.” He pointed to the shift in officials’ 2025 forecasts, which now anticipate just two quarter-point rate cuts instead of three, calling it a “wholesale shift.”

JPMorgan Chase, a key player in U.S. bond markets, noted that money markets are pricing in only a 0.31 percentage point rate cut in 2025. This outlook, significantly tighter than the bank’s earlier 0.75-point forecast, underscores the magnitude of the Fed’s policy shift.

The decision triggered a sharp sell-off on Wall Street, with the S&P 500 falling 3% and the tech-heavy Nasdaq Composite dropping 3.6%. High-profile winners of the 2024 rally were hit hard, including: Tesla, down 8.3%; Meta (Facebook’s parent company), down 3.6%; Amazon, down 4.6%.

Smaller companies, often seen as more sensitive to US economic fluctuations, also suffered. The Russell 2000 index declined 4.4%.

In Asia, stocks fell in early Thursday trading. Benchmarks in South Korea and Taiwan dropped 1.8% and 1.6%, respectively. Meanwhile, U.S. government bond prices fell, driving the yield on two-year Treasuries—sensitive to Fed policy—up by 0.11 percentage points to 4.35%.

The U.S. dollar surged 1.2% against a basket of six major currencies, reaching its strongest level since November 2022. According to Wells Fargo senior economist Mike Pugliese, the currency had already been rising on expectations of inflationary pressures following Donald Trump’s election victory last month. However, Wednesday’s Fed decision “poured more petrol on the fire.”

The South Korean won dropped to a 15-year low against the dollar, while the Japanese yen weakened 0.5%.

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Amazon pledges $1 billion to Trump inauguration fund

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Amazon confirmed on Thursday that it will contribute $1 million to Donald Trump’s inauguration fund, a move mirroring similar actions by other major tech companies, including Meta, the parent company of Facebook and Instagram. Amazon also plans to broadcast Trump’s inauguration via its Prime Video service.

This announcement comes as major tech executives seek to establish ties with the incoming U.S. president, despite Trump’s longstanding criticisms of Big Tech. Trump has frequently accused technology companies of censorship and bias against conservative media.

Jeff Bezos, Amazon’s founder and CEO, is reportedly planning to meet Trump at his Mar-a-Lago resort next week, according to The Wall Street Journal, which first reported Amazon’s donation. Similarly, Google CEO Sundar Pichai and Apple CEO Tim Cook have expressed their congratulations to Trump since his election victory in November.

Trump’s relationship with Amazon has been fraught with challenges. During his first term, he accused the company of undercutting competition and criticized its tax policies. In 2018, Trump ordered a review of U.S. Postal Service package pricing, claiming the agency acted as Amazon’s “courier.”

Apple, meanwhile, faces potential risks from Trump’s proposed tariff policies, which could disrupt critical supply chains in China. However, during Trump’s first term, Cook secured exemptions for certain Apple products.

Meta’s CEO, Mark Zuckerberg, and other tech leaders have also engaged with Trump. According to The Information, Zuckerberg dined with Trump after the election. Pichai is also expected to meet Trump this week.

While Trump scrutinized Big Tech during his presidency, Amazon now faces mounting regulatory pressure under President Joe Biden. The U.S. Federal Trade Commission (FTC), led by Lina Khan, has been investigating Amazon for alleged monopoly practices, with several states filing lawsuits last year. The FTC is also examining major cloud service providers, including Amazon, over partnerships in artificial intelligence.

Despite earlier conflicts, Bezos recently praised Trump for his “tremendous grace and courage under real fire” in a post on X (formerly Twitter) following an assassination attempt. Bezos, who also owns The Washington Post, reportedly prevented the newspaper from endorsing Trump’s Democratic opponent Kamala Harris in the 2024 election.

Speculation about a tacit agreement between Bezos and Trump has surfaced, allegedly tied to Blue Origin, Bezos’s rocket company competing with Elon Musk’s SpaceX.

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Investors poured $140 billion into U.S. equities following Trump’s victory

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Nearly $140 billion has flowed into U.S. equity funds since last month’s election, as investors anticipate Donald Trump’s administration will implement sweeping tax cuts and regulatory reforms.

According to the Financial Times (FT), which cites data from EPFR, U.S. equity funds have seen inflows totaling $139.5 billion since Trump’s victory on November 5. This surge in investment made November the busiest month for equity inflows since records began in 2000.

The massive influx of funds has driven major U.S. stock indexes to a series of record highs, as investors appeared to shrug off concerns about potential economic risks, including inflation and its implications for the Federal Reserve’s interest rate policy.

“The growth agenda that Trump has put on the table is being fully embraced,” said Dec Mullarkey, Chief Executive of SLC Management. He added that Trump’s picks for top administration posts have been seen as “very market friendly.”

Trump has promised to fill his administration with financial experts, including Scott Bessent as Treasury Secretary, and Paul Atkins, a cryptocurrency advocate, as Chairman of the Securities and Exchange Commission (SEC).

The president-elect has outlined a pro-growth agenda, emphasizing reduced taxes, deregulation, and economic expansion. These proposals have spurred optimism among investors, fueling a rally in the market.

The S&P 500, Wall Street’s primary stock market indicator, has risen 5.3% since Election Day, bringing its total gains for the year to 28%. Smaller companies, which are often seen as more responsive to changes in the U.S. economy, have outperformed larger firms during this period. The Russell 2000 index recently hit a record high for the first time in three years.

While U.S. equity funds have enjoyed record inflows, other global markets have experienced outflows emerging market funds have seen net withdrawals of $8 billion, with China-focused funds accounting for $4 billion; funds investing in Western Europe have lost $14 billion; and Japan-focused funds have seen outflows of approximately $6 billion.

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