Profound impacts for the world’s two largest economies may come out of a meeting today in Bali, Indonesia, as President Biden sits down with Chinese leader Xi Jinping ahead of the G20 summit. While the White House has expressed it is “looking for competition, not conflict,” tensions have been running high between the two countries. The U.S. recently approved curbs on chip exports to China – bringing up trade war flashbacks – while the status of Taiwan has been a particularly tense subject since an August visit by House Speaker Nancy Pelosi and Russia’s war in Ukraine.
Quote: “I know I’m coming in stronger, but I don’t need that. I’ve spent more time with him than any other world leader,” Biden told reporters before the meeting. “I know him well and he knows me. We have very little misunderstanding. We’ve just got to figure out where the red lines are and what are the most important things to each of us going into the next two years.”
The U.S. has sought to portray its new export restrictions on advanced semiconductors as a national security issue, and not as an effort to sideline the Chinese economy, but it may be hard to convince Beijing on the matter. Goldman Sachs forecasts that the ban will shave a quarter of a percentage point off China’s economic growth in 2023, at a time when it’s already dealing with the fallout from Xi’s zero-COVID policy. The U.S. is also debating whether to roll back some Trump-era tariffs on Chinese goods, though a final decision still isn’t expected to be reached this year.
Go deeper: The meeting will come as both sides have bolstered their political support. Biden has scored a Democratic majority in the Senate following last week’s midterm elections, while Xi came out of the CCP’s recent National Party Congress with more power than any Chinese leader in a generation. (2 comments)
Hoaxers taking advantage of Twitter’s new loosened rules for getting “verified” accounts are flooding the app with fake messages from celebrities and corporations, apparently slamming the stock prices of some notable companies. Lilly (LLY) fell some 4.5% on Friday after someone used a verified account designed to look like the firm’s official social-media channel to tweet: “We are excited to announce insulin is free now.” The posting not only took down the pharma firm’s stock price, but also apparently hit those of rival insulin makers Novo Nordisk (NVO) and Sanofi (SNY) as well.
Elsewhere: Lockheed Martin (LMT) slipped 5.5% on Friday, seemingly in part due to a bogus “verified” account purporting to disclose: “We will begin halting all weapons sales to Saudi Arabia, Israel and the United States until further investigation into their record of human rights abuses. #WeAreLM.” Other fake messages using “verified” accounts designed to look official included an alleged message from PepsiCo (PEP) that “Coke is better.” Meanwhile, Poland Spring parent Nestle (OTCPK:NSRGY) appeared to admit that “We steal your water and sell it back to you.”
Spoofers even used fake “verified” accounts to post hoax messages that appeared to come from other companies that are headed by new Twitter owner Elon Musk. For example, a fake SpaceX account seemed to disclose that “it is with a heavy heart that we announce that we will be ceasing all missions. We plan to funnel $240 million in overstanding government subsidies to groups dedicated to sustainable agriculture and ending World Hunger.” Hoaxers also tweeted from multiple seemingly verified accounts for Musk’s flagship company Tesla (TSLA). One missive poked fun at TSLA’s steep share-price decline since October 2021, writing that “honestly a 53% drop in stock price doesn’t [faze] us. If there’s anyone who knows about crashing it’s us.”
Outlook: Such problems have apparently prompted Twitter to quietly remove its new option of offering verified accounts to those who simply pay $7.99-a-month for Twitter Blue, instead of going through the firm’s previous elaborate process of confirming users’ identities. Musk introduced the new $7.99-a-month option shortly after he closed his $44B deal last month to take Twitter private. The billionaire has since reportedly warned that the social media giant is losing money and could fall into bankruptcy unless revenues rise. (240 comments)
Denting some of the recent enthusiasm seen after last week’s CPI report, Federal Reserve Governor Christopher Waller called the 7.7% inflation print “enormous” and said it was “just one data point.” Markets surged following the figure showing that inflation pressures were decelerating, with traders long awaiting any sign of moderating consumer prices. It’s been nearly two years since the CPI figure was last at the Fed’s targeted goal of 2%, but the most recent 7.7% number was the lowest level since January.
The transcript: “These rates are going to stay – keep going up – and they’re going to stay high for a while until we see this inflation get down closer to our target,” Waller told a UBS Group conference in Sydney. “We’ve still got a ways to go. This isn’t ending in the next meeting or two. We’re looking at moving in paces of potentially 50 [basis points] at the next meeting or the next meeting after that. We’ve got to see this continue because the worst thing you can do is stop [tightening conditions] and then it takes off again, and you’re caught.”
“The market seems to have gotten way out in front over this one CPI report. Everybody should just take a deep breath, calm down. We’re going to see a continued run of this kind of behavior and inflation slowly starting to come down, before we really start thinking about taking our foot off the brakes here. We’ve got a long, long way to go unless by some miracle incomes start dropping off very rapidly, which I don’t think anybody expects. Rates are going to keep going up and they are going to stay high for a while until we see this inflation get down closer to our target.”
Soft landing? “I’ve just been amazed to watch rates go up almost 400 basis points in about seven months, eight months and the markets haven’t collapsed. We don’t have a financial crisis or anything along those lines. We’ve got to have a good level, and we got it there fast, and we didn’t break anything. We are certainly not breaking anything in the labor markets in terms of unemployment. Households are in good shape, and household balance sheets are in very good shape. I can’t speak for [Fed] Chair [Jerome Powell], but as I watched the press conference, that was the signal – to quit paying attention to the pace and start paying attention to where the end point is going to be.” (21 comments)
A bomb went off in the heart of Istanbul on Sunday afternoon, killing at least six people and wounding 81 others (50 have so far been discharged from the hospital). The attack occurred in the middle of Istiklal street, a popular tourist destination on the city’s “European Side,” which includes bars, cafes, designer shops and many foreign diplomatic missions. Concerns are growing over a revival in terrorism in one of the Middle East’s largest economies, especially with Turkish presidential and parliamentary elections only six months away.
Snapshot: Interior Minister Suleyman Soylu said the attack was perpetrated by members of the Kurdistan Workers’ Party, or PKK, which Ankara considers terrorists. A female assailant was said to have detonated the bomb, after CCTV footage showed her sitting on a bench for more than 40 minutes, and then leaving behind a bag just minutes before the explosion. “Attempts to submit Turkey and Turkish people by acts of terrorism are doomed to fail today as they were in the past,” Turkish President Recep Tayyip Erdogan said at a press conference before his departure for the G20 summit.
The bombing was the first such incident in years in Turkey, which was the target of a series of similar attacks by Islamic State and Kurdish militant groups from 2015 to 2017. Along with a failed military coup attempt in 2016, the events roiled Turkey’s economy, and threatened to upend its tourism industry which brings in billions of dollars of foreign currency.
Go deeper: Not helping the situation is a serious inflation problem. Turkey’s annual inflation rate rose to a record 25-year-high of 85.5% in October, according to official figures, sharply eroding Turks’ earnings and savings. President Erdogan believes in an unorthodox approach that higher rates cause inflation, rather than prevent it, with Turkey’s central bank slashing rates for the third consecutive month in October.