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Global markets remain in shock: Nikkei, Dow Jones, Kospi at lows

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Japan’s Nikkei 225 stock index started the week down 12.4%, continuing the sell-off that has rocked global markets as investors fretted over the state of the US economy.

The Nikkei closed down 4,451.28 points at 31,458.42. The broader TOPIX index fell 12.8% as selling intensified in the afternoon.

Earlier on Monday, the S&P 500 Index fell 2.4% and the Dow Jones Industrial Average fell 2.6%, turning the trading outlook on Wall Street negative.

The report, which showed that hiring by US employers slowed much more than expected last month, according to AP, shook financial markets and destroyed the euphoria that had lifted the Nikkei to an all-time high above 42,000 in recent weeks.

The Nikkei 225 fell 5.8 per cent on Friday, its worst two-day drop ever. Its worst one-day drop was on 20 October 1987, the so-called “Black Monday”, when it fell 3,836 points, or 14.9%. That Monday was grim enough, with the benchmark falling as much as 13.4% at one point.

Tokyo stocks have been falling since the Bank of Japan (BoJ) raised its key interest rate on Wednesday. The Nikkei is currently down 3.8% year-on-year.

One of the factors that prompted the BoJ to raise rates was the ongoing weakness of the Japanese yen, which has pushed inflation above the central bank’s 2% target. Early on Monday, the dollar fell to 142.59 yen from 146.45 at the end of Friday, well below levels of over 160 yen a few weeks ago. The euro also fell from $1.0923 to $1.0914.

Stocks hit highs earlier this year on the back of developments in artificial intelligence.

The recent sell-off has also hit markets dominated by computer chip makers such as Samsung Electronics and other technology stocks: South Korea’s Kospi fell more than 9 per cent on Monday as Samsung’s shares fell 11.6 per cent. The Kospi closed down 8.8 per cent at 2,441.55.Taiwan’s Taiex also lost 8.4 per cent as the world’s biggest chipmaker Taiwan Semiconductor Manufacturing Co. fell 9.8 per cent.

Hong Kong’s Hang Seng index lost 2.2% to 16,579.97 and Australia’s S&P/ASX 200 index fell 3.7% to 7,649.60.

Double whammy on Borsa Istanbul

The Shanghai Composite Index, which has been somewhat isolated from other world markets by capital controls, initially rose but then fell 1.5 per cent to 2,862.56.

The S&P 500’s 1.8 per cent drop on Friday was the first consecutive loss of at least 1 per cent since April. The Dow Jones Industrial Average fell 1.5 per cent and the Nasdaq Composite Index fell 2.4 per cent, 10 per cent below the record it set last month. Investors call a decline at these levels a “correction”.

On the Borsa Istanbul, the circuit breaker system connected to the index was activated at 09:55:22 following a 6.72 per cent drop in the morning. Then, as the decline in the index deepened, the circuit breaker was activated for the second time. The BIST 100 index fell below the critical 10,000 points.

Stocks fell sharply on Friday after weaker-than-expected US payrolls data fueled fears that high interest rates to curb inflation could drag the US economy into recession.

The VIX, an index that measures how worried investors are about an impending drop in the S&P 500, jumped nearly 26% early on Monday. Eventually, the VIX rose to 34. The VIX, which is considered Wall Street’s “fear indicator”, last reached this level in June 2020. Bitcoin, which recently soared to nearly $70,000, fell 14 per cent to $54,155.

Oil prices also fell, with US benchmark crude down 74 cents to $72.78 a barrel. Brent crude, the international standard, lost 67 cents to $76.14 a barrel.

Artificial intelligence stocks plunge

Artificial intelligence stocks fell as much as 9.6%, with Apple down 6.1%. Microsoft, Meta and Tesla also lost more than 5%.

While the largest US companies fell on Tradegate in Germany, Nvidia led the “Magnificent Seven” group in the decline of US stock index futures.

Nvidia fell as much as 17% on Tradegate, while Apple fell 10%, Microsoft 9%, Alphabet 9.6%, Amazon 9.3%, Meta 10% and Tesla 10%.

According to Bloomberg, these moves are a sign that “the air is coming out of the equity markets, driven by big gains in a small number of stocks”.

It notes that if confidence in the AI trade continues to fall on weak earnings and the US economy really takes a hit, there could be more losses to come.

However, it points out that a “window of opportunity” could open for investors, especially if central banks take action to cut interest rates, which could support sectors that benefit from low borrowing costs.

Goldman Sachs: A healthy correction

In a report, IG’s Yeap Jun Rong said investors will be watching data on the US services sector from the Institute for Supply Management on Monday, which could help determine whether the global sell-off was an overreaction.

The global rout began just days after US stock indexes had their best day in months after Federal Reserve Chairman Jerome Powell gave the clearest sign yet that inflation is slowing enough to start cutting interest rates in September.

Now there are growing concerns that the Fed may have increased the risk of recession in the world’s largest economy by keeping its key interest rate at a two-decade high for too long.

On the other hand, Christian Mueller-Glissmann of Goldman Sachs told Bloomberg that the market situation shows a “somewhat healthy correction”. He also argued that while the weakness in US data was a surprise, Goldman Sachs economists were “not that worried”.

Bets on an immediate rate cut: Will the Fed cut in a week?

The market turmoil is fuelling bets on an immediate policy response from the Fed.

Investors are currently pricing in a 60% chance of a 25bp cut within a week.

Given that the central bank announced its last decision just a few days ago, this is seen as a real sign of concern.

AMERICA

Trump continues to fill his cabinet with Israel supporters

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President-elect Donald Trump continues to shape his cabinet, set to take office in January. Trump has nominated South Dakota Governor Kristi Noem to lead the Department of Homeland Security. She will work closely with Border Czar Tom Homan to “secure the border and ensure that our American homeland is safe from our enemies,” Trump stated.

Kristi Noem, a devout Christian and the first woman elected governor of South Dakota, is now in her second term. Reflecting on her leadership in South Dakota, Trump highlighted Noem’s dedication to border security: “Kristi has been very strong on border security. She was the first governor to send National Guard troops to aid Texas during the Biden Border Crisis—a commitment she’s upheld eight times.”

Noem has faced criticism for controversial remarks suggesting South Dakota’s indigenous tribes benefit from the drug cartel industry. This statement led to her being banned from all nine reservations in the state.

Although not a border state governor, Noem has consistently taken a tough stance on immigration. In 2010, she supported an effort to block the Obama administration’s lawsuit against Arizona’s immigration law. During Trump’s first term, she called for punitive actions against sanctuary cities that refuse to cooperate with federal immigration authorities.

Noem is also known as a strong supporter of Israel. Earlier this year, she signed a bill mandating that the International Holocaust Remembrance Alliance’s (IHRA) definition of anti-Semitism be used in discrimination investigations. The bill, titled “Ensuring the Safety of God’s Chosen People,” garnered praise from former Israeli Foreign Minister Israel Katz, who called Noem a “true friend of Israel.”

In March 2024, Noem faced a lawsuit from Travelers United, a consumer advocacy group, after endorsing a Texas-based cosmetic dentist without disclosing a financial relationship. Travelers United claimed Noem had begun “working as a social media influencer,” promoting services without transparency. Noem clarified on X (formerly Twitter) that she “never received any money” for these alleged endorsements.

New Israeli Ambassador Huckabee: ‘There is no such thing as a Palestinian’

Donald Trump announced that Mike Huckabee, former Arkansas governor, will serve as U.S. ambassador to Israel. A long-time ally of Israeli Prime Minister Benjamin Netanyahu, Huckabee has consistently supported Jewish settlers and backs Israel’s claim to annex parts of the occupied West Bank.

“Mike Huckabee loves Israel and the people of Israel. He will work tirelessly for peace in the Middle East,” Trump stated. Huckabee, an evangelical pastor and host on the Trinity Broadcasting Network (TBN), is a staunch defender of Israel’s historical rights in the West Bank and believes in Israel’s right to annex this region.

Fox News host Hegseth tapped to lead Pentagon

Trump’s selection of Fox News host and former military officer Pete Hegseth as head of the Pentagon surprised many. Hegseth, a vocal America First proponent, lacks traditional government or Pentagon experience, sparking discussion on Trump’s unconventional choice.

“Pete is tough, smart, and a true believer in America First. With Pete at the helm, America’s military will be great again, and our enemies will take notice,” Trump remarked.

Though Hegseth’s selection deviates from Trump’s other traditional security appointments, he has gained Trump’s respect through his book, The War on Our Warriors, which criticizes left-wing attitudes toward U.S. troops. Hegseth is a decorated Army combat veteran and former CEO of Concerned Veterans for America, a group funded by the Koch brothers that advocates for outsourcing veterans’ healthcare.

Hegseth also garnered Trump’s favor through his advocacy for the pardons of service members convicted of war crimes, including 1st Lieutenant Clint Lorance and Major Mathew Golsteyn.

CIA appointment: Ratcliffe’s anti-Iran stance

John Ratcliffe, former Director of National Intelligence, has been appointed CIA Director, reinforcing Trump’s hardline stance against Iran. Ratcliffe replaces Bill Burns, who led Biden’s attempts to broker ceasefires in Gaza.

An outspoken critic of Biden’s foreign policy, Ratcliffe has accused the administration of downplaying intelligence on Hamas to avoid escalation. He argues that deprioritizing Middle Eastern intelligence has left the U.S. vulnerable to terrorist threats. Ratcliffe also alleged Iranian interference in the 2020 election, accusing the regime of trying to “foment social unrest” in the U.S.

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Ukraine offers natural resources to win Trump’s support

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The Ukrainian government’s “victory plan” for the incoming Donald Trump administration seeks to influence the US president-elect by highlighting potential business deals, access to raw materials, and troop deployments.

According to The Financial Times (FT), Ukrainian and European officials report that Ukraine’s allies in Europe and the US, including senior Republicans, are consulting on how best to propose initiatives that encourage closer cooperation with Kyiv rather than cut essential aid to the country.

These proposals stem from concerns among Ukrainian and European officials that Trump may move quickly toward a peace deal with Russia, potentially jeopardizing Western support for Ukraine.

Two of the ideas reportedly presented to Trump are outlined in Volodymyr Zelensky’s “victory plan.” They were later presented to the Ukrainian president during his meeting with Trump in New York in September.

One proposal suggests replacing some US troops stationed in Europe with Ukrainian forces after the war ends. The other, initially conceived by Republican Senator Lindsey Graham, proposes sharing Ukraine’s critical natural resources with Western partners, according to sources involved in drafting Zelensky’s plan.

A source familiar with the meeting said Trump expressed interest in these two points.

Ukrainian business leaders are also in talks with the government about granting Trump “investment screening” powers that would allow him to select who can do business in the country. An insider described this concept as “ABC—anybody but China,” a stance believed to resonate with Trump.

Certain Ukrainian industries, particularly those relying on Chinese technology and materials like telecommunications, could transition to US suppliers, potentially attracting Western investment. While still in its early stages, some business leaders close to the presidential administration believe this idea could appeal to Trump.

After Trump’s re-election last week, Zelensky reported a “great” first phone call. However, officials in Kyiv and its allies worry the US could reduce military support when Republicans take office in January.

Officials added that Ukraine and its allies fear Russian President Vladimir Putin, strengthened by Russia’s battlefield successes, may “drive a hard bargain” and pressure Washington into a peace deal favoring Moscow.

A person involved in drafting Kyiv’s proposal remarked, “The first to blink loses this game. Putin thinks he is on a winning track and can secure everything he wants.”

Meanwhile, European officials are concerned about being excluded from Trump-led negotiations and lacking influence over any potential solutions that could impact European security in the medium term.

Western allies have reacted somewhat indifferently to the “victory plan,” especially regarding the call for NATO membership for Kyiv and advanced weapons support.

An individual involved in the planning stated that Ukraine began drafting its proposals over the summer “to establish our narrative before Trump establishes his.”

Long frustrated by President Joe Biden’s reluctance to escalate military support, Kyiv hopes Trump will find the points specifically tailored for him compelling.

“The level of dissatisfaction with the Biden administration had reached a point where they felt it was time for change, and that this change [to Trump] could be beneficial,” the source said.

Oleksandr Merezhko, chairman of the Ukrainian parliament’s foreign affairs committee, described the offer to the incoming US president as “a strategic move to demonstrate that Ukraine is not a burden on the West.”

“Trump wants to be a winner, not a loser. To be a winner, he needs to show Putin his place,” Merezhko added.

Sources also indicate that Kyiv aims to “appease the Trump camp” by replacing Oksana Markarova, its ambassador to Washington. Republican House Speaker Mike Johnson had called for Markarova’s dismissal after she organized an all-Democrat visit to a US munitions factory for Zelensky in September.

Former Foreign Minister Dmytro Kuleba was reportedly offered the post but declined.

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Donald Trump taps Marco Rubio as his Secretary of State and Mike Waltz as National Security Advisor

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President-elect Donald Trump continues to assemble his cabinet, recently filling two critical posts: Secretary of State and National Security Advisor.

Florida Senator Marco Rubio has been appointed U.S. Secretary of State. Known for his tough stance on China, Iran, Cuba, and Venezuela and as a staunch supporter of Israel, Rubio’s appointment highlights a foreign policy direction aligned with Trump’s hardline approach on international issues.

Rubio, who has previously questioned U.S. aid to Ukraine, recently suggested that the war has reached a stalemate and should be “brought to an end”:

“I think the Ukrainians have been incredibly brave and strong in standing up to Russia, but at the end of the day, what we’re funding here is a stalemated war, and it needs to be brought to a conclusion. I think there should be some common sense here,” he added.

Rubio also argued that “you don’t have to be a fan of Vladimir Putin to end the war,” indicating a pragmatic view of the Ukraine-Russia conflict.

Rubio’s ‘axis of evil’: China, Iran, Cuba, Venezuela

Rubio, a prominent China hawk sanctioned by Beijing in 2020 for his stance on Hong Kong protests, has consistently advocated for a firm U.S. stance against Chinese influence. In 2019, he called on the Treasury Department to launch a national security review of TikTok’s acquisition of Musical.ly, leading to an investigation and eventual divestment order.

As the ranking Republican member of the Senate Intelligence Committee, Rubio has also pressured the administration on Huawei, calling for a complete sales block after the sanctioned Chinese tech giant released a new laptop powered by Intel’s AI processor chip.

Waltz: A decorated Green Beret advocating for strong U.S. global role

Mike Waltz, a decorated Green Beret and Army veteran, brings extensive experience to his role as National Security Advisor. Waltz’s military service and work at the Pentagon are detailed in his book, The Warrior Diplomat: The Wars of a Green Beret from Washington to Afghanistan.

Since his election to Congress in 2018, Waltz has served on Armed Services, Foreign Relations, and Intelligence Committees. His views on U.S. national security and foreign policy align with Republican perspectives, affirming the key role of the United States in global affairs.

While Waltz has encouraged NATO allies to increase defense spending, he has refrained from endorsing Trump’s occasional calls for the U.S. to withdraw from NATO. “Look, we can be allies and friends and have tough negotiations,” he stated recently.

Waltz: China hawk and advocate for stronger sanctions on Russia

Waltz believes the U.S. should continue supporting Ukraine, though he recently recommended a reassessment of financial support. Known for his tough stance on China, he has argued that the U.S. should prepare for potential conflict in the Pacific and sponsored legislation to reduce dependence on critical minerals from China and protect American universities from Chinese espionage.

Following the U.S. withdrawal from Afghanistan in 2021, Waltz frequently criticized President Joe Biden and the White House. In a recent NPR interview, he argued that it is “perfectly reasonable” to seek a diplomatic resolution to the war in Ukraine.

Waltz suggested that the U.S. could gain leverage over Russian President Vladimir Putin by imposing energy sanctions on Russia and increasing U.S. energy exports. “His economy and his war machine will dry up very quickly. I think that would bring Putin to the table,” he remarked, hinting that long-range weapons supplied to Ukraine could be used for strikes deeper into Russian territory.

Waltz: Bridging the gap between the Pentagon and Silicon Valley

Waltz’s new role as National Security Advisor could lead to stronger collaborations between the Pentagon and Silicon Valley. He advocates for a cultural shift in defense procurement and innovation, saying, “There are a lot of new technologies coming out of Silicon Valley and elsewhere that are really itching to help with our defense and security problems, and they can’t get through the bureaucracy.”

He concluded, “New leadership is essential, and a cultural change is needed.”

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