Category: zerohedge

Futures have staged a miraculous recovery after yesterday’s historic drop – the biggest ever on a day when the Fed cut rates, and are up some 70 points from yesterday’s close…

… and Dow futures were up a delightfully appropriate 666 points…

… as investors decided to forget all about the Fed’s panicked emergency rate cut and instead took solace from the surprising “Biden Bounce” during Super Tuesday which saw Bernie’s odds for re-election crash, shelving risks of a socialist America, while expectations of an even more forceful global policy responses to the coronavirus kept hopes alive that central banks are just getting started.

Biden, a non-socialist moderate seen as less likely to raise taxes and impose new financial regulations, won primaries in nine states. That set up a one-on-one battle for the Democratic presidential nomination with democratic socialist Bernie Sanders.

In Europe, the STOXX 600 gained 1.5%, on course for a third straight days of gains. Markets in Frankfurt, London .FTSE and Paris gained a similar amount. “After the action from the Fed the market is very, very watchful now for potential moves from other central banks,” said CIBC FX strategist Jeremy Stretch. On Wall Street, S&P 500 futures climbed 1.8% on Biden’s showing, after falling on Tuesday overnight despite the Fed’s rate cut.

The European moves built on gains in Asia, where MSCI’s broadest index of shares ex-Japan rose 0.3%. Asian stocks had a volatile trading session, while purchasing managers’ indexes for Hong Kong and China fell to record lows as the novel coronavirus curtailed business activity.

Markets in the region were mixed, with Jakarta Composite and South Korea’s Kospi gained 2% on a $9.8 billion government stimulus package to mitigate the coronavirus impact. Australia’s S&P/ASX 200 and India’s S&P BSE Sensex Index fell. The Federal Reserve’s emergency interest-rate cut buoyed some markets. Still, the slide in Hong Kong and China PMIs to new lows last month underscored the extent that the public-health emergency may erode company earnings. The Topix declined 0.2%, with Aeon Hokkaido and Usen-Next falling the most. The Shanghai Composite Index rose 0.6%, with Nanjing Chixia Development and Baoding Tianwei Baobian Electric posting the biggest advances

The Fed’s surprise move followed a shift in money market pricing late last week. Futures swung rapidly to anticipate such a cut at the Fed’s March meeting. Now, they imply another 50 basis points of easing by April, even though investors and the Fed itself raised doubts that easing will help deal with a public health crisis.

“If you’re in China and you can direct liquidity exactly where you need to, and have rate cuts where you want them to be, monetary policy is very effective,” said Sebastien Galy, senior macro strategist at Nordea Asset Management. “In the West, in a democracy, monetary policy is less effective – you need to incentivise banks to do what is in to the benefit of the whole.”

Overall, the MSCI world equity index which tracks shares in 49 countries, gained 0.2%. It is still down around 10% falling a brutal sell-off last week as fears over economic damage from the coronavirus gripped markets.

“They’re pushing on a string,” said veteran emerging-markets investor Mark Mobius in a Bloomberg TV interview. “The problem is not so much interest rates, which are already very low globally. The problem is the supply chain coming out of China.” Markets will worsen “unless China can ramp up production,” he said.

As global markets and US rebounded, 10-year Treasury yields slipped even more after breaking below 1% for the first time in 150 years, however they have since posted a bit of a rebound and after hitting 0.93% around the European open, are back above 1.000%.

Eurozone bond yields also held near record lows on Wednesday, with Germany’s benchmark 10-year Bund yield around -0.64%, near six-month lows set on Monday. Some saw the Fed’s extraordinary move as a decision to move hard and early because it expected further economic damage from the spread of the coronavirus.

“They have signalled willingness to take further action, which is why we are seeing a further rally in bonds,” said Tim Drayson, head of economics at Legal & General Investment management. “Some argue that monetary policy can’t fight the supply shock – but it will support demand and confidence.”

Investors were also watching the Bank of England for signs it would follow the Fed. Money markets have moved to fully price in a BoE rate cut of 25 basis points at its next meeting, up from a chance of 80% before the Fed move. Sterling dipped 0.1% against the U.S. dollar and slipped 0.3% against the euro before clawing back some ground.

Elsewhere in FX, the dollar was little changed as Antipodean and Scandinavian currencies advanced as European stock markets rebound after opening lower; the euro erased losses after London came into the market and bunds gave up an early gain, underperforming bonds in the European periphery. Japan’s currency fell against all its major peers, erasing an earlier gain against the dollar, as leveraged accounts covered short positions in dollar-yen after the Nikkei 225 index reversed losses. The Australian dollar extended an advance after growth data for the fourth quarter last year beat estimates.

Looking at the day ahead now, and the data highlight will be the release of the services and composite PMIs for February from around the world. In addition, there’ll be German retail sales for January, the final reading of Italian Q4 GDP and Euro Area retail sales for January. Over in the US there’ll be the ISM non-manufacturing index for February, the ADP employment change for February, and weekly MBA mortgage applications. From central banks, the Bank of Canada will be deciding on rates and the Federal Reserve will be releasing their Beige Book. There’ll also be remarks from incoming BoE Governor Bailey, BoE Deputy Governor Broadbent, and St. Louis Fed President Bullard.

Market Snapshot

• S&P 500 futures up 1.7% to 3,049.25
• STOXX Europe 600 up 1% to 384.85
• MXAP up 0.3% to 157.58
• MXAPJ up 0.4% to 519.73
• Nikkei up 0.08% to 21,100.06
• Topix down 0.2% to 1,502.50
• Hang Seng Index down 0.2% to 26,222.07
• Shanghai Composite up 0.6% to 3,011.67
• Sensex down 0.8% to 38,307.99
• Australia S&P/ASX 200 down 1.7% to 6,325.40
• Kospi up 2.2% to 2,059.33
• German 10Y yield fell 0.3 bps to -0.628%
• Euro down 0.09% to $1.1163
• Italian 10Y yield fell 14.7 bps to 0.822%
• Spanish 10Y yield fell 2.4 bps to 0.164%
• Brent futures up 1.6% to $52.70/bbl
• Gold spot down 0.2% to $1,637.18
• U.S. Dollar Index up 0.1% to 97.26

Top Overnight Headlines from Bloomberg

• The European Central Bank said it would restrict all non- essential travel until April 20, Japan’s Olympics minister said it would be possible to delay the summer games to later in the year
• Joe Biden cemented a remarkable comeback on the biggest primary night of the Democratic presidential campaign with victories in nine states across the country, including upsets in Texas and Massachusetts, even as Bernie Sanders took the biggest prize of the night, California
• China’s car sales fell 80% in February, according to preliminary numbers from the China Passenger Car Association released Wednesday, the biggest monthly plunge on record. Average daily sales improved toward the end of the month compared with the first three weeks, PCA said
• The European Union imposed five-year tariffs on steel road wheels from China in a dispute that will ease concerns by manufacturers in Europe about whether revamped EU trade- protection rules are strong enough
• Expectations for rate cuts have climbed in Japan and New Zealand in the wake of Federal Reserve’s emergency interest-rate cut, and in Australia there are now signs that traders are starting to prepare for quantitative easing
• At Sweden’s central bank the newest policy maker said monetary easing is the wrong way to fight the fallout of the coronavirus while the governor of Norway’s central bank said a “significant” slump in trade triggered by the coronavirus might force him to reassess the outlook for interest rates

Asian bourses traded somewhat mixed following from the weak rollover from Wall St. where all major indices slumped around 3% despite the Fed delivering an emergency rate cut of 50bps, as this failed to alleviate the slowdown concerns from the coronavirus outbreak and the G7 statement on coordinated policy action also provided little in terms of details in which it did not commit to any monetary or fiscal action. Nonetheless, US equity futures partially nursed losses overnight as focus turned to Super Tuesday Democrat Primary results which showed former VP Biden performed well although there was still far to go with the biggest states California and Texas still up for grabs. ASX 200 (-1.7%) and Nikkei 225 (U/C) were lacklustre with Australia pressured by underperformance in tech and the top-weighted financials sector due to virus fallout concerns and the lower interest rate environment, while the Japanese benchmark was indecisive amid a choppy currency and uncertainty regarding the Tokyo Olympics after a minister suggested the event could be held back although Chief Cabinet Secretary Suga later reiterated they will continue to move ahead with preparations. Elsewhere, Hang Seng (-0.2%) and Shanghai Comp. (+0.6%) were temperamental despite speculation the PBoC could lower rates this month and after the HKMA moved in lockstep with the Fed through a 50bps rate cut, as participants also digested further weak data in which Chinese Caixin Services and Composite PMIs printed record lows. Finally, 10yr JGBs surged above the 154.00 level as they tracked the upside in T-notes following the Fed’s emergency rate cut and with the BoJ also in the market for over JPY 800bln in up to 5yr JGBs.

Top Asian News

• Netanyahu Camp’s Lead Narrows, Encumbering Coalition Building
• Desperate for Debt Relief, Lebanon Hatches Plan to Avoid Default
• Rare Default on Green Bond in India Flags Broader Credit Strains
• India’s Sensex Extends Decline on Reports of New Virus Cases

European equities saw a relatively shaky start to the session before eventually moving back into positive territory (Eurostoxx 50 +0.5%) as markets attempt to gauge the efficacy of recent and potential upcoming stimulus efforts from global authorities. Stateside, futures markets are indicating the likelihood of a positive open on Wall St., however, it remains to be seen whether this is a result of genuine optimism over recent policy responses or merely a fleeting paring back of some of yesterday’s declines. Furthermore, attention in the US will also partially be placed on the fallout from the Democratic “Super Tuesday” which saw a stellar performance for former VP Biden who now holds a total of 320 delegates (at the latest count) vs. 252 for Sanders. In terms of how this will effect the broader performance for stocks going forward, analysis is mixed. Some argue that Biden is more market-friendly than Sanders and thus his success should be seen as a positive, whereas others argue that even though Sanders would be detrimental for markets (should he enter the White House), Trump would be more likely to beat him, with Trump viewed by most as the overall most market-positive candidate. Sectoral performance in Europe is higher across the board with outperformance for material, healthcare and consumer staples. Individual movers include Eurofins Scientific (+7.8%) at the top of the Stoxx 600 post-earnings, Dialog Semiconductor (+3.6%) shares have been supported after posting favourable revenue guidance, whilst Rio Tinto (+3.6%) trade higher after a broker upgrade at SocGen. To the downside, the clear outlier is Intu Properties (-20%) after abandoning its equity placement, whilst Metro AG (-4.2%) are lower following reports of a potential tie-up with Sysco; reports that were later rebuffed.

Top European News

• Virus Takes Aim at $1.7 Trillion Industry as Tourists Stay Home
• Day of Reckoning Nears for Intu After It Pulls Share Sale
• Coronavirus Disrupts Johnson’s Bounce as U.K. Services Slow
• Billionaire Agnellis Sells PartnerRe to Covea for $9 Billion

In FX, the index and Greenback in general have regained some composure after Tuesday’s slide in wake of the Fed’s early or emergency March policy easing, with the former back above the 97.000 handle within a 97.423-104 range vs yesterday’s 96.926 base. However, Usd/major and EM pairs are mostly softer after FOMC Chairman Powell refrained from signalling that the 50 bp inter-meeting rate cut would likely suffice to protect the US economy from nCoV contagion, leaving the door ajar for more stimulus if necessary.

• AUD/NZD/CAD/CHF/SEK/NOK – The Aussie appears to be building a firmer base on the 0.6600 handle vs its US peer on the back of firmer than forecast Q4 GDP data that will feed the notion of no back-to-back or follow up action from the RBA after its ¼ point reduction even though Deputy Governor Debelle warns that the bushfires and coronavirus will have more of an adverse impact on the economy in Q1. This has also lifted Aud/Nzd back above 1.0500 as the Kiwi continues to trail behind awaiting the RBNZ’s response to the COVID-19 outbreak later this month, with Nzd/Usd still struggling to advance beyond 0.6300. On that note, the Loonie is deriving some traction from another rebound in crude prices ahead of the BoC, albeit not as much as the Norwegian Crown given Eur/Nok rooted towards the base of a 10.3045-3730 band, as Usd/Cad pivots 1.3350. In terms of market pricing, -25 bp is baked in, but the probability of a like-for-like Fed move is also high at around 80%, hence options assigning a wide 75 pip break-even for the event. Elsewhere, while the SNB sits tight pending its quarterly review next week, Usd/Chf is holding circa 0.9550 and hardly acknowledging Swiss CPI slipping below zero y/y again, but the Swedish Krona has gleaned support from another upbeat PMI to straddle 10.5500 vs the Euro.
• GBP/EUR/JPY – All on the back foot as the Buck regroups, with Cable still unable to sustain gains above 1.2800 and respecting the 200 DMA (1.2830) amidst heightened BoE policy stimulus calls, while Eur/Usd has faded ahead of 1.1200 and hefty option expiries between 1.1200-05 in 1.6 bn as the coronavirus spreads and especially in Italy. Lastly, the Yen has pared gains around 107.00 following comments from BoJ Governor Kuroda indicating a higher level of vigilance for Chinese epidemic effects and a potentially lower bar for a policy response.
• EM – Broad recoveries across the region, and with the Lira also acknowledging positive comments from Turkish President Erdogan contending that a ceasefire can be forged at Thursday’s meeting with Russia to try and resolve the ongoing stand-off in Syria.

In commodities, WTI and Brent prices are firmer this morning, following yesterday’s emergency stimulus action by the Fed as markets are firmly on the look-out for action elsewhere, but more pertinently for the complex itself is reports pertaining to OPEC, as the JMMC meeting gets underway today. Comments this morning point towards Russia and Saudi holding bilateral discussions but reports note that Russia are likely to make their decision on cuts at the last moment. In terms of the magnitude of cuts sources point towards a cut around the 1mln mark, but that any figure above the 600k BPD initial JTC recommendation must be considered. These reports have coincided with upside in the crude complex, which saw WTI briefly surpass the USD 48/bbl mark; however, this upside has occurred alongside a general grinding higher in risk sentiment so its unclear how much of the move can be directly attributed to the OPEC commentary. Indicative scheduling for this week’s OPEC events saw the JMMC commence from around 11:00GMT today, with OPEC set to meet tomorrow before the entire OPEC+ committee convenes on Friday. As well as a decision on any additional cuts, focus will be placed on remarks around compliance as countries such as Russia are still not meeting their quota. Looking ahead, today sees the EIA weekly release, which is expected to see a build of 3.333mln barrels which, if correct, is just shy of double yesterday’s API crude build at 1.7mln. In terms of metals, it has been a relatively steady day for spot gold that is currently just shy of the USD 1650/oz mark, which appears to be capping price action and is in proximity to yesterday’s high; after the metal was supported on the emergency FOMC cut.

US Event Calendar

• 7am: MBA Mortgage Applications, prior 1.5%
• 8:15am: ADP Employment Change, est. 170,000, prior 291,000
• 9:45am: Markit US Services PMI, est. 49.4, prior 49.4
• 9:45am: Markit US Composite PMI, prior 49.6
• 10am: ISM Non-Manufacturing Index, est. 54.9, prior 55.5
• 2pm: U.S. Federal Reserve Releases Beige Book

DB’s Jim Reid concludes the overnight wrap

From my calculation that’s the 8th emergency inter-meeting Fed cut in my 24.5 years of working in financial markets so it feels like a landmark event especially as the other six have occurred in three clusters (98, 01, and 07/08). Yesterday afternoon we looked at what happened to the S&P 500 in the week, six months, and one year after these last 7 emergency cuts. The medium price move after these cuts were +2.8% (1w), -4.3% (6m) and -9.2% (1yr). When you consider the average 1yr price return (excluding dividends) for the S&P 500 is around 6% then that is a considerable 6 months and one year under-performance when the Fed deems it necessary to do an emergency cut. We’ve put the table in the pdf if you click the full link. 1998 was the big positive outlier as you didn’t see a subsequent recession and we moved into maximum bubble phase with the extra stimulus. That would be the bull hope. However for now the market will debate whether they have fired too much of their armoury too early. With Fed Funds now in the 1-1.25% range it feels a little like the flood defences to zero have seen a big erosion over the last 24 hours. Long-term readers will know that I think the Fed balance sheet will explode in the years ahead with the forward debt profile of the US (and other countries to be fair). I suspect this accelerates that move. To be fair to the Fed they were probably damned if they did and damned if they didn’t.

After the 50bp cut around at 10am EST the Fed said the move was unanimous and mentioned in their statement afterwards that “the coronavirus poses evolving risks to economic activity.” In his press conference, Chair Powell acknowledged the economic implications, saying that “the virus, and the measures that are being taken to contain it, will surely weigh on economic activity, both here and abroad for some time.” He also left open the prospect of further easing, saying that “we will use our tools and act as appropriate to support the economy”. This is the first 50bps move in either direction since the GFC and the market closed pricing in 3.01 25bp cuts, to lower rates a further 75.2bps by the January 2021 meeting, relative to yesterday’s 2.98 cuts and 74.6bps. So the 50bps cut has just led to the market pricing an extra 50bps anyway over the last 24 hours. In response, our US Economics team have accelerated this timeline and now expect another 50bp cut at the March meeting, a move that would be consistent with the historical experience of inter-meeting actions. The situation remains highly fluid, however, and positive developments related to financial markets or the coronavirus spread could justify a delay in any further easing. They will reassess this call ahead of the March meeting. See more at the link here.

Looking at the market reaction, it wasn’t encouraging that the S&P 500 fell sharply after the move. To be fair we went from -1% to just shy of +1.5% in the three minutes after the move, before fading for the rest of the session to be down -3.68% at one point and then settling to -2.81% at the close. We still closed +4.26% above levels before the Fed statement on Friday night for reference. With S&P futures up +1.27% this morning on a stunningly good night for Biden (more below), that gap from the lows has edged a bit wider for now.

10yr Treasuries surged following the decision, with yields falling -16.4bps on the day to another record low of 0.999% yesterday, while the 2s10s curve steepened for a 7th consecutive session, ending up a further +3.8bps. Treasuries are at 0.972% as we type. With US rates hitting new lows across the curve bank stocks led losses yesterday followed by technology stocks. Gold was the major beneficiary following the decision though, ending the session up +3.24%, its largest daily advance since the day after the Brexit referendum. The VIX climbed 3.40 points to finish at 36.82, its 4th close in a row over 30 – the first time that’s happened since November 2011 on the US credit downgrade. US HY spreads widened +8.7bps, at their widest closing levels since 2016.

Overnight in Asia markets are trading mixed with continued high volatility. The Kospi (+2.20%) is leading the gains on the back of the announcement of KRW 11.7tn stimulus by the government and expectations of a rate cut from the BoK at its unscheduled emergency meeting today which is currently underway. Meanwhile, the Nikkei (+0.08%) is trading flat but the Hang Seng (-0.11%) and Shanghai Comp (-0.39%) are down. The Japanese yen is down -0.24% this morning after being up by +1.12% yesterday.

As for overnight data releases, China’s February Caixin services PMI came in at a shocking 26.5 against expectation of 48 (which may not have fully adjusted after the weekend’s numbers), marking the lowest reading (by a very long way) since the series began and in turn bringing the composite PMI to 27.5 (vs. 51.9 last month) also the lowest since the series began. Japan’s final February services PMI came in one tenth higher than flash read at 46.8 while composite PMI was in line with flash read at 47.0. We also have the Bank of Canada rate decision today and markets are now pricing in a 66% chance of a 50bps cut which is substantially up from the start of trading yesterday when markets were expecting just a 25bps cut.

In other news, Bloomberg is reporting overnight that the BoJ is likely to consider downgrading its economic assessment this month due to the expected impact from the coronavirus outbreak. The BoJ meeting is due on March 18-19th. Elsewhere, the latest on the virus is that the WHO head has said that the coronavirus doesn’t transmit as efficiently as influenza but the fatality rate is higher at 3.4%, based on reported cases. Earlier, the fatality rate was assumed to be around 2%.

Turning to super Tuesday, Former Vice President Joe Biden solidified the idea that this might rapidly become a two person race now and he may well be the clear frontrunner again after turning party endorsements and a big South Carolina outperformance into a successful Super Tuesday. It continues to be likely that no one will win a majority of pledged delegates according to fivethirtyeight.com’s model, but now Joe Biden looks to have path to a plurality of delegates. This could lead to the nomination, especially because he would likely get a majority of super delegates on the second ballot. The concern for Biden coming into the night was that Sanders would build too large of a lead in states like California and Texas, the biggest and third-biggest delegate prizes of the night. However while Biden may still end the night with less overall delegates than Sanders – based on what the California and Texas vote counts ends up as – there is now a clear path forward for Biden that may not have existed a week ago in a field with a divided moderate vote. There is now renewed pressure on Joe Biden to continue performing both electorally and on the debate stage (next one is 15-Mar) as we move forward, because he was in the presumptive winner position before and then fell off that perch.

Joe Biden started the night well by building on his strength in South Carolina over the weekend into winning more Southeastern states, picking up Virginia, North Carolina, Alabama, Oklahoma, Arkansas, and Tennessee. Overall Biden has now officially won 8 states. Biden won Minnesota, a state Sanders won 4 year ago. Until recently Minnesota was expected to vote for their home Senator Klobuchar and Biden was not particularly close, but following her dropping out and endorsing of Biden, he was able to win it. This shows just how important the last few days were as the moderate wing came together behind Biden. Biden showed strength in the northeast where he won Massachusetts, Senator Warren’s home state – who has indicated she will not drop out yet, but that is a very disappointing result for her and she may still yet in coming days. He is currently leading in Maine, which would be an upset considering Sanders is the neighboring Senator. Biden is slightly up in Texas and gaining, which would be a major upset as Sanders was banking on running up the vote there.

Senator Sanders has officially won 3 states and will likely win in California which is the biggest prize of the night. At first glance it doesn’t look promising for Michael Bloomberg. Anyway overall Super Tuesday has been a big win for Biden with Sanders being dealt a notable blow. He is still in the race but is now having to catch up against the moderates rallying behind Biden.

Before all this and completing the picture from yesterday, European equities closed half way between the 3 minute Fed rally and the bulk of the US declines and so held on to gains with the STOXX 600 up +1.37%, its strongest day in a month. European sovereign debt also seemed to benefit from the Fed’s surprise move, with the spread of Italian 10yr-bunds falling by -14.6bps yesterday, in its largest move tighter in nearly six months. That came in spite of the fact that the number of Italian cases of the coronavirus has risen to more than 2,000. 10yr bunds yields were relatively unchanged on the day themselves, down -0.1bps. EURUSD strengthened beyond 1.12 for the first time since early January, before paring back some gains to close at 1.118. Even as risk assets were selling off hard, Oil stayed fairly unchanged (Brent -0.08%) and is up c.+1.40% this morning on news that an OPEC+ committee is recommending virus-related cuts of their own ahead of the meeting tomorrow/Friday to try and boost slumping oil prices.

The decision from the Fed came after the conference call earlier in the day between G7 finance ministers and central bank governors. In their subsequent statement, it said that “we reaffirm our commitment to use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks.” On the fiscal side, it also said that “G7 finance ministers are ready to take actions, including fiscal measures where appropriate, to aid in the response to the virus and support the economy during this phase.” However, the policymakers didn’t lay out any specific moves for what they’d do next.

Economic data releases have understandably taken a back seat over the last 24 hours, but we did get some key Euro Area data, with the flash CPI reading falling to 1.2% as expected, while the core CPI reading rose to 1.2%, also in line with expectations. The releases coincided with inflation expectations for the Euro Area coming off their record lows, with five-year forward five-year inflation swaps moving up +4.42bps to 1.152%. Meanwhile the Euro Area unemployment rate remained at 7.4% as expected, remaining at its joint lowest since April 2008. Finally, the UK construction PMI surprisingly rose to 52.6 (vs. 49.0 expected), its highest level since December 2018.

To the day ahead now, and the data highlight will be the release of the services and composite PMIs for February from around the world. In addition, there’ll be German retail sales for January, the final reading of Italian Q4 GDP and Euro Area retail sales for January. Over in the US there’ll be the ISM non-manufacturing index for February, the ADP employment change for February, and weekly MBA mortgage applications. From central banks, the Bank of Canada will be deciding on rates and the Federal Reserve will be releasing their Beige Book. There’ll also be remarks from incoming BoE Governor Bailey, BoE Deputy Governor Broadbent, and St. Louis Fed President Bullard.

Update (0800ET): The Wall Street Journal reports that Russia opposes the Saudi plan to deepen OPEC+ cuts by 1.2mm b/d.

Developing…

*  *  *

As we detailed earlier, Brent crude futures were up 75 cents, or 1.45%, at 52.61 a barrel at 0700ET Wednesday after a three-day move of +10%, following expectations that major oil producers could make significant production cuts at the OPEC meeting on March 5. 

Brent has tumbled into a bear market, down 26.5% in 38 sessions, following the outbreak of Covid-19 in China, now spreading across the world, has slashed global oil demand.

“This is a sudden, instant demand shock,” said Jim Burkhard, vice president and head of oil markets at IHS Markit Ltd.

“The scale of the decline is unprecedented.”

OPEC+ Joint Ministerial Monitoring Committee, the body that oversees production, will meet on Wednesday, ahead of the formal meeting, to discuss cuts. Saudi Arabia is urging OPEC+ to come to an agreeance ahead of Thursday for a reduction of 1 million barrels per day to compensate for lost demand seen by the virus crisis, Bloomberg notes. 

“The recommended 600,000-barrel-a-day additional cut for the second quarter of 2020 will be seen as too little,” Mohammad Darwazah of consultant Medley Global Advisors said in a note. “It is clear that the group is mulling a deeper production pullback.”

The push for deep cuts comes as crude had its worst weekly decline since the 2008 financial crisis on mounting macroeconomic headwinds developing because of the virus spread, which forced Saudi Arabia to demand Russia jump on board with production cuts. 

“With demand-side uncertainties having already dragged Brent futures about 19 percent lower since the start of the year … oil’s upside appears significantly capped amid persistent concerns over the coronavirus outbreak,” said Han Tan, market analyst at FXTM.

Ahead of tomorrow’s big meeting, Saudi Arabia and other OPEC members will spend most of Wednesday persuading Russia to join with output cuts to prop up prices. 

Iranian Oil Minister Bijan Namdar Zanganeh told reporters on Wednesday that Russia will decide on production cuts at the very last minute. 

A significant output cut by OPEC on Thursday could help to normalize oil demand and inventories in the second half of the year. Still, the global slowdown that started several years ago, has left the oil industry saturated with large stockpiles. 

Authored by Paola Subacchi via Project Syndicate,

Northern Italy currently is the center of the COVID-19 outbreak in Europe. So far, 17 Italians have died as a result of the new coronavirus, and 650 have been infected. Schools in the region have been shut, universities have suspended lessons, companies have asked their staff to work from home, and many theaters, cinemas, and bars are closed. The virus caused the cancellation of the last two days of the Venice Carnival, which attracts thousands of visitors every year. And the area south of Milan, where Italy’s first COVID-19 cases were reported, is under quarantine.

Epidemics are not new in Northern Italy, which was at the center of trade routes throughout the Middle Ages and the Renaissance. In fact, Venice was the first city to develop methods to contain and treat virulently contagious diseases. Back then, the authorities isolated people with symptoms in lazarets (ships permanently at anchor and used for quarantine) on islands outside the city, and restricted the movements and interactions of healthy Venetians during a 40-day quarantine period.

Evidence is mixed as to whether these measures were effective. Milan lost almost half its population to the plague in 1630, and Venice lost approximately 30%. But the mortality rate could have been much higher had the authorities not fought the contagion the way they did.

Modern medicine and healthier living standards have greatly reduced the frequency of epidemics, significantly slowed the pace of contagion, and slashed mortality rates. The overall mortality rate from COVID-19 currently is around 34 per thousand, with elderly people and those with health problems being most at risk. Epidemics in early modern Northern Italy, by comparison, had mortality rates of 300-400 per thousand.

The big question now is whether the Italian authorities’ COVID-19 containment measures are commensurate with the scale of the problem, or too draconian.

Moreover, are these steps dictated by genuine public-policy goals, or mainly by political considerations?

Managing critical risks and strengthening resilience are key public-policy objectives. An outbreak of a highly contagious flu in a densely populated area needs to be contained even if the mortality rate is negligible, because an epidemic will cause hospitals and health-care systems in many areas to collapse. And, as with financial crises, it is always better to prevent a crisis than to confront one, because the latter entails huge economic, social, and political costs.

Ex post measures aimed at containing the spread of COVID-19, such as quarantines and travel bans, don’t seem to work in our age of mobility and economic integration. After the United States government announced at the end of January that it would temporarily refuse entry to foreign nationals who had recently traveled within China, Italy’s government banned direct flights to and from China. But this measure – adopted in response to pressure from the populist right-wing League party – will create tensions with China, a major trading partner that buys about $16 billion worth of Italian exports each year. Nor does the flight ban solve the problem of monitoring indirect arrivals to Italy from China.

The ban may rebound on Italy in other ways, too. Its European neighbors, for example, may be tempted to impose entry bans on Italians in order to appease popular anxiety and anti-foreign sentiment. Already, the French far-right leader Marine Le Pen has urged France’s government to suspend the Schengen Agreement and introduce border controls with Italy. And earlier in February, the Austrian authorities briefly blocked trains entering the country from Italy.

Epidemics affect different countries in different ways, and national policymakers must tailor their responses accordingly. At the same time, governments should coordinate measures aimed at protecting health-care workers and vulnerable individuals and countries. The lesson from Italy so far is that a lack of coordination among local governments, coupled with political fragmentation, puts all containment measures at risk by encouraging more people to leave the worst-affected areas. Many university students, for example, have already returned home from Northern Italy. So, containment measures in one place may succeed only in shifting the problem elsewhere.

The current expectation is that the COVID-19 virus will continue to spread within Italy and throughout the rest of Europe. Although the numbers remain tiny – there currently are only 41 confirmed cases in France, for example – the panic level is high enough to open the door to potentially restrictive measures.

Given today’s poisonous political climate, can we be sure that governments will not introduce measures that override existing legislation and restrict individual rights and freedoms? Might people infected with the COVID-19 virus lose their right to health treatment when abroad, for example? Or might they be prevented from returning to their own country, as US President Donald Trump announced would be the case for infected Americans overseas? In that respect, the COVID-19 outbreak has highlighted the absence of an international legal framework to deal with pandemics.

Meanwhile, the outbreak will have a significant impact on the Italian economy, and likely tip it into recession. Northern Italy is the country’s economic engine, with per capita GDP of approximately €35,000 ($38,000) – compared to the national figure of €28,000 – and a 67% employment rate (against 59% nationwide). But major trade events such as the Milan Furniture Fair have been canceled or postponed, business trips have been scrapped, and uncertainty is rife. Furthermore, virus-related cancellations are already hitting the country’s tourism industry, which accounts for 14% of GDP.

Having long been saddled with a sluggish economy – real GDP grew by just 0.2% in 2019 – Italy is now faced with a recession. Along with Germany’s economic slowdown and the uncertainty of Brexit, the country’s COVID-19 affliction is further grim news for Europe.

It looks like the Chinese started something…

Following reports that Beijing had “quarantined” dirty cash, the WHO warned on Monday that the virus could survive on banknotes, potentially spreading Covid-19 within communities, and across the world. To reduce the risk of being infected by money, the NGO advised citizens in countries struggling with outbreaks to favor digital payments when possible, the Daily Telegraph reported.

That the WHO is telling the public to avoid cash is hardly a surprise: research has found that coronaviruses have been found to live on surfaces for as long as 9 days.

During the statement, a WHO spokesman referenced a Bank of England study claiming that banknotes “can carry bacteria or viruses” and urged people to wash their hands. Other studies have shown that 90% of US $1 bills had bacteria present, and one Swiss study found that viruses had survive on the faces of Swiss francs for days.

The WHO’s warnings follow the People’s Bank of China last month started disinfecting currency deposited at Chinese banks using ultraviolet light, before quarantining the bills for a week before releasing them back into circulation.

Brits, and their fellow Europeans, should be increasingly careful as the virus spreads across Europe, the WHO warned, via the Telegraph:

“We know that money changes hands frequently and can pick up all sorts of bacteria and viruses,” a spokesman told the Telegraph.

“We would advise people to wash their hands after handling banknotes, and avoid touching their face. When possible, it would also be advisable to use contactless payments to reduce the risk of transmission.”

Of course, that one of the world’s major NGOs is seizing the opportunity to proclaim the virtues of ‘paperless’ money is hardly a surprise: the globalist push toward a ‘cashless society’ has been underway for years now, having had its biggest successes in Scandinavia. Sweden has gone virtually “cashless”, and in such a short time, they’ve already confronted the many drawbacks of relying exclusively on digital money.

As we noted previously, here is what happens next:

…the virus spreads throughout the US and Europe and governments respond the same way China’s government has; martial law and full blown concentration camp culture. This would lead to civil war in the US because we are armed and many people will shoot anyone trying to put us into quarantine camps. Europe is mostly screwed.

The establishment then suggests that paper money be removed from the system because it is a viral spreader. China is already pushing this solution now. 

Magically, we find ourselves in a cashless society in a matter of a year or two; which is what the globalists have been demanding for years. Everything goes digital, and thus even local economies become completely centralized as private trade dies.

A viral outbreak is a significant danger to us all, but an even greater threat is the supposed cure. Trading our economic and social freedom in the name of stopping the coronavirus?  No matter how deadly the bug, it’s just not worth it.

Authored by Paul Joseph Watson via Summit News,

A video shows a man alleged to be a human trafficker bragging about how he has ‘filled Europe with immigrants’ and how he is making thousands of euros after Turkey opened its borders.

The man said he had been trafficking people for 20 years and that he receives 500-600 euros per head for each migrant he successfully exports.

Despite serving 6 years in jail for the crime, he brags about how he is back in business following President Erdogan’s announcement that Turkey would be re-opening its border and encouraging millions of migrants to invade Europe.

“I have filled half of Europe with immigrants,” he declares.

Turkish trafficker: i’m doing this job for 20 years, i live by it, i passing bumans from the borders, i get 500-600 euro each head, i was 6 years in prison for this reason, now Erdogan opened the border and i came out to make money, i have filled the half Europe with immigrants. pic.twitter.com/YNuOxjDtB5

— Nic 🇬🇷🇨🇾 (@NicAthens) March 2, 2020

Erdogan opened the floodgates in response to an airstrike in Syria which killed 30 Turkish soldiers. He is demanding NATO support in Turkey’s fight against the Russian-backed Syrian army.

“I told them it’s done. It’s finished. The doors are now open. Now, you will have to take your share of the burden,” he said in a televised speech.

“Hundreds of thousands have crossed, soon we will it will reach millions,” Erdogan warned.

As we highlighted earlier, a Syrian migrant was reportedly killed during clashes with Greek border police.

Another video shows Greek coastguards beating a dinghy full of migrants with a long poll and shooting warning shots into the water in an attempt to get them to head back to Turkey.

The Greek Coast Guard is acting with much more aggression & confidence than I have seen in them before

They are taking the migration challenge seriously

This vid was recorded this morning. In it, the Coast Guard shoots warning shots at the migrants & blocks their way to #Greece pic.twitter.com/f3dcECt07g

— BasedPoland (@BasedPoland) March 2, 2020

*  *  *

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If Tesla was truly a story about actual economics – you know, things like demand and production – we might expect the fact that registrations are plunging to have an effect on the company’s stock price.

But, as it goes, the company’s stock is and has been wholly disconnected from reality, which is why at the stock sits currently with a $700 handle, we’re certain it won’t be phased by the fact that registrations have plunged in top European markets. 

For instance, Tesla recorded only 83 new cars in Norway last month, comparing to 1,016 vehicles last year. In the Netherlands, registrations also plunged, down 68% to 155 units, according to Bloomberg.

It is not a good look for Tesla, as these are two of the only four countries that Tesla breaks out revenue for on a quarterly basis. For the first two months of the year (and first 66% of the first quarter), registrations were down 77% and 42% in Norway and the Netherlands – and that was against easy comps. The Model 3 was only just starting to get underway with sales in early 2019. 

Norway began to saturate last year and the Netherlands saw a favorable tax provision for EV buyers disappear. Revenue from the Netherlands and Norway was up 65% and 48% in 2019, respectively, which helped offset a 15% drop in the U.S. With these key Europeans countries not absorbing the blow any further, what could Tesla’s Q1 2020 revenue look like?

Of course, the Tesla “carrot on the string” now turns to Germany. In addition to Tesla building its next Gigafactory there, the country has unveiled a landmark climate related stimulus package. It is offering subsidies to boost EV sales and is expected to overtake Norway as the regional EV leader.

But the falling sales in Europe will make it tough to cushion any blow not only in the U.S., but in China, where coronavirus has ravaged the country and auto sales, in general, are down between 80% and 90% for February. This hasn’t stopped Tesla’s stock from holding a bid in the $600 to $700 range, even despite the market’s recent sell off on coronavirus fears.

For now, the $120 billion cash incinerating company remains in tact.

We can’t help but wonder if a further plunge in the markets could reveal any “interesting” information about Tesla and/or its financials going forward. 

Authored by Tom Luongo via Gold, Goats, ‘n Guns blog,

It’s been a dramatic few days in Syria. The Syrian Army pushed across Idlib Province to retake major strongholds of Al-Qaeda-linked jihadists who have controlled the region for years thanks to support from Turkey.

This provoked a major escalation from Turkey’s president Recep Tayyip Erdogan. Major offensives by the jihadists, backed by Turkish armor and air power, pushed back the Syrian army from the outskirts of Idlib city and took back the town of Saraqib at the confluence of the M4 and M5 highways which are of major strategic importance.

That counterattack occurred while the Syrian Army had moved south to claim vast territory northeast of the Russian air base at Latakia.

Erdogan has been threatening for weeks for the Syrian army to halt its advance or face the brunt of the Turkish Army. He made good on those threats, but only after taking advantage of Russian President Vladimir Putin’s temperance.

Over 30 Turkish soldiers were killed in an airstrike on a convoy in southern Idlib who, by all accounts, were embedded with, to Russia, legitimate targets, i.e. members of Hay’at Tahrir al-Sham (HTS), formerly al-Nusra and really just al-Qaeda.

According to the latest from Elijah Magnier, Putin unilaterally stood his air force down to de-escalate the situation and Erdogan used that opening to attack east of Idlib and south against the Kurds at Afrin towards Aleppo.

According to the sources, Russia was surprised by the number of Turkish soldiers killed and declared a unilateral ceasefire to calm down the front and de-escalate. Moscow ordered its military operational room in Syria to stop the military push and halt the attack on rural Idlib. Engaging in a war against Turkey is not part of President Putin’s plans in Syria. Russia thought it the right time to quieten the front and allow Erdogan to lick his wounds.

Two possibilities exist here.

• Either Putin entirely miscalculated Erdogan’s intentions in Idlib expecting to him to be reasonable knowing that the bombing was unintentional.

• Or, Putin stood his forces down to finally find out what Erdogan was willing to do to retain Idlib.

It’s clear that Erdogan believes something that is simply not true, that the Sochi agreement between Russia and Turkey which established the demilitarized zones and Turkish observation posts was a de facto ceding that territory to Turkey.

Putin has made it clear that the territorial integrity of Syria is to be re-established and from there a political solution determined by Syrians occurs.

Erdogan’s betrayal goes far beyond just the counter-attack at Saraqib. He also ignored entreaties from Iran to stop attacking and sent drones in to attack an Iranian base and military hospital south of Aleppo.

Again from Magnier:

Turkey, which maintains over 2000 officers and soldiers in 14 observation locations that are today under Syrian Army control, ignored the Iranian request and bombed Iranian HQ and that of its allies, including a military field hospital killing 30 (9 Hezbollah and 21 Fatimiyoun) and tens of the Syrian army officers. The Turkish attack wounded more than 150 soldiers of the Syrian Army and their allies.

And this is the big problem for Erdogan. Because he has now decided that because Russia doesn’t want a war with a member of NATO, he feels that gives him the room to enforce his edicts in Syria.

But in doing this he has also greatly over-extended himself because the U.S., under Trump, wants nothing to do with what he’s doing in Idlib directly. The proxy war is fine. Harrassing Assad is fine. Forcing Putin to commit more while the world economy shudders is fine.

But there’s nothing Trump will do materially to get involved in Idlib. The usual suspects in the U.S. are crying for a U.S. maintained “No Fly Zone” over Idlib but that is simply the Israeli lobby talking.

That has been ruled out.

Multiple times Erdogan has gone to the U.S. and NATO asking for assistance and multiple times he’s been sent back with nothing except, “Go for it!”

But at the same time, Putin’s political instincts may have betrayed him here. Russia’s position in Syria is tenuous if Erdogan wants to play all of his cards. It would be insane for him to do this, but this is not someone I believe at this point is a rational actor.

By all accounts the Kremlin was slow to respond to the ferocity of Turkey’s attacks over the weekend and it resulted in a lot of battle-hardened Syrian troops and commanders getting killed along with a lot of armor (and possibly air defense systems) destroyed.

And now, Putin will have to resupply the Syrians while regaining their trust that he has the situation in hand. It is hard to fault Putin’s handling of the situation in Syria, overall. He’s made deft move after deft move, operating at an incredibly high rate of competence over the past four-plus years.

At some point he was going to make a serious mistake, and this unilateral cease fire over Idlib may have been it. Trusting a duplicitous snake like Erdogan to not seize the opportunity Putin’s humanity afforded him has, at a minimum, extended the timetable for a resolution of Idlib.

We don’t know as of yet what extent the damage Turkey has inflicted on the Syrians to hold their gains and/or counter-attack. The Turks are obviously lying about the number of tanks destroyed and Syrian troops killed.

The numbers are laughably large.

The SAA has re-taken Saraqib and the M4/M5 crossing, but they had to abandon gains made in the south to do so. That ended their campaign to retake the M4 highway and cut off Turkey’s resupply routes to Idlib.

Idlib City is, for now, off the table.

And Putin’s move to immediately deploy Russian military police there is a clear message to Erdogan that if he is serious about not wanting a war with Russia, Saraqib is now off limits.

The question is whether or not Erdogan is listening. Because to this point he hasn’t been.

There are other reports of Russia moving large numbers of troops and airlifting in personnel and weaponry into Latakia air base and the naval base at Tartus and turn the tables on Erdogan.

Mass transfer: 8 Il-76 arrived in Khmeimim, as well as a group of air defense officers🇷🇺🇸🇾

3 Il-76 transport aircraft of RuAF arrived in Khmeimim in Syrian province of Latakia on night of March 1 to 2. In general, over past 72 hours, 8 aircraft of this type have landed at AFB. pic.twitter.com/2aSNZPeNDi

— Sukhoi Su-57 Felon 🇷🇺🇮🇳 (@I30mki) March 2, 2020

For more than a year Erdogan has used his troops as shields in those observation posts to allow HTS and al-Nusra terrorists to attack across the agreed upon DMZ, especially south towards the suburbs of Damascus.

Those observation posts and the troops are now in the hands of the SAA and are effectively hostages. This is also part of the reason why Erdogan has escalated things here.

This is deeply embarrassing to the would-be Sultan.

All of this is backdrop for the upcoming meeting between Putin and Erdogan in Moscow later this week. Make no mistake, the Sultan has been summoned not the other way around. Erdogan will try and wheedle a deal out of Putin which gives him some of what he wants.

However, I don’t think that will fly. Despite his missteps here, I think Putin still has this situation under control. In fact, if I know Putin at all, I’d say that Erdogan will leave Moscow with nothing, even though Erdogan has cards he thinks he can play.

And it is the silence coming from major NATO players that is his biggest issue. Trump cannot get involved in Idlib in an election year.

Without NATO backing him up, what is he going to offer Putin?

Having ticked off all of his benefactors to this point, trying to use access to the Bosporus and NATO Article 5 as leverage for his aggressions in Syria have their limits.

But, at the same time, Putin has to recognize now, with these moves by Erdogan, that he is dealing with a person with delusions of grandeur at a Hitlerian level. And I don’t say that lightly.

It’s clear his neo-Ottoman Empire dreams blind him and all he sees is the U.S.’s pullback from the region as his opportunity to press his military advantage regionally.

If Putin doesn’t recognize this and put a stop to him now, Idlib will deteriorate and his troops will be there far longer and under much worse conditions than even he has the political capital to expend.

Erdogan’s moves here betray a solipsism which infects all men who have held power for too long and through their success, believe themselves infallible.

He’s managed to bring Turkey to this point where NATO is exasperated with him and the SCO states see Turkey as a prize to advance their agenda to stare down the unipolar power, the U.S., in the West. Whether this was skill or blind luck is anyone’s guess.

I expect it’s a bit of both, since I don’t like to underestimate my enemies.

And I honestly think he thought he would be able to turn the tables on Russia and China here, getting concessions from them while blackmailing NATO with refugees.

The Saker has initial thoughts on this a bit more detailed militarily than I do, and I recommend you read them.

But with Erdogan’s drones now falling out of the sky at the Syrian border and his army now potentially facing thousands of Iranian-made precision missiles and Hezbollah likely rejoining the fight in real numbers thanks to his betrayal of them, it is likely his misjudgment is far greater than anything Putin is guilty of.

It looks like this is that moment where someone finally tells tells him that while Turkey may be important, he isn’t.

And if he wants to stay in power, the time for him to leave NATO for real is now.

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Join my Patreon because you think smoked Turkey is tasty. Install the Brave Browser if you want to help stop thugs like Erdogan from us talking about it.

Authored by Brian Cloughley via The Strategic Culture Foundation,

There are many influential supporters of nuclear war, and some of these contend that the use of ‘low-yield’ and/or short-range weapons is practicable without the possibility of escalation to all-out Armageddon.

In a way their argument is comparable to that of the band of starry-eyed optimists who thought, apparently seriously, that there could be such a beast as a ‘moderate rebel’.

In October 2013 the Washington Post reported that “The CIA is expanding a clandestine effort to train opposition fighters in Syria amid concern that moderate, US-backed militias are rapidly losing ground in the country’s civil war,” and the US Congress gave approval to then President Barack Obama’s plan for training and arming moderate Syrian rebels to fight against Islamic State extremists. The belief that there could be any grouping of insurgents that could be described as “moderate rebels” is bizarre and it would be fascinating to know how Washington’s planners classify such people. It obviously didn’t dawn on them that any person who uses weapons illegally in a rebellion could not be defined as being moderate. And how moderate is moderate? Perhaps a moderate rebel could be equipped with US weapons that kill only extremists? Or are they allowed to kill only five children a month? The entire notion was absurd, and predictably the scheme collapsed, after expenditure of vast amounts of US taxpayers’ money.

And even vaster amounts of money are being spent on developing and producing what might be classed as moderate nuclear weapons, in that they don’t have the zillion-bang punch of most of its existing 4,000 plus warheads. It is apparently widely believed in Washington that if a nuclear weapon is (comparatively) small, then it’s less dangerous than a big nuclear weapon.

In January 2019 the Guardian reported that “the Trump administration has argued the development of a low-yield weapon would make nuclear war less likely, by giving the US a more flexible deterrent. It would counter any enemy (particularly Russian) perception that the US would balk at using its own fearsome arsenal in response to a limited nuclear attack because its missiles were all in the hundreds of kilotons range and ‘too big to use’, because they would cause untold civilian casualties.”

In fact, the nuclear war envisaged in that scenario would be a global catastrophe — as would all nuclear wars, because there’s no way, no means whatever, of limiting escalation. Once a nuclear weapon has exploded and killed people, the nuclear-armed nation to which these people belonged is going to take massive action. There is no alternative, because no government is just going to sit there and try to start talking with an enemy that has taken the ultimate leap in warfare.

It is widely imagined — by many nuclear planners in the sub-continent, for example — that use of a tactical, a battlefield-deployed, nuclear weapon will in some fashion persuade the opponent (India or Pakistan) that there is no need to employ higher-capability weapons, or, in other words, longer range missiles delivering massive warheads. These people think that the other side will evaluate the situation calmly and dispassionately and come to the conclusion that at most it should itself reply with a similar weapon. But such a scenario supposes that there is good intelligence about the effects of the weapon that has exploded, most probably within the opponent’s sovereign territory. This is verging on the impossible.

War is confusing in the extreme, and tactical planning can be extremely complex. But there is no precedent for nuclear war, and nobody — nobody — knows for certain what reactions will be to such a situation in or near any nation. The US 2018 Nuclear Posture Review stated that low-yield weapons “help ensure that potential adversaries perceive no possible advantage in limited nuclear escalation, making nuclear employment less likely”. But do the possible opponents of the United States agree with that? How could they do so?

The reaction by any nuclear-armed state to what is confirmed as a nuclear attack will have to be swift. It cannot be guaranteed, for example, that the first attack will not represent a series. It will, by definition, be decisive, because the world will then be a tiny step from doomsday. The US nuclear review is optimistic that “flexibility” will by some means limit a nuclear exchange, or even persuade the nuked-nation that there should be no riposte, which is an intriguing hypothesis.

As pointed out by Lawfare, “the review calls for modification to ‘a small number of existing submarine-launched ballistic missile (SLBM) warheads’ to provide a low-yield option.

It also calls for further exploration of low-yield options, arguing that expanding these options will ‘help ensure that potential adversaries perceive no possible advantage in limited nuclear escalation, making nuclear employment less likely.’ This is intended to address the argument that adversaries might think the United States, out of concern for collateral damage, would hesitate to employ a high-yield nuclear weapon in response to a ‘lower level’ conflict, in which an adversary used a low-yield nuclear device. The review argues that expanding low-yield options is ‘important for the preservation of credible deterrence,’ especially when it comes to smaller-scale regional conflicts.”

“Credible deterrence” is a favourite catch-phrase of the believers in limited nuclear war, but its credibility is suspect. Former US defence secretary William Perry said last year that he wasn’t so much worried about the vast number of warheads in the world as he was by open proposals that these weapons are “usable”. It’s right back to the Cold War and he emphasises that “The belief that there might be tactical advantage using nuclear weapons – which I haven’t heard being openly discussed in the United States or in Russia for a good many years – is happening now in those countries which I think is extremely distressing.” But the perturbing thing is that while it is certainly being discussed in Moscow, it’s verging on doctrine in Washington.

In late February US Defence Secretary Esper was reported as having taken part in a “classified military drill in which Russia and the United States traded nuclear strikes.” The Pentagon stated that “The scenario included a European contingency where you’re conducting a war with Russia and Russia decides to use a low-yield, limited nuclear weapon against a site on NATO territory.” The US response was to fire back with what was called a “limited response.”

First of all, the notion that Russia would take the first step to nuclear war is completely baseless, and there is no evidence that this could ever be contemplated. But ever if it were to be so, it cannot be imagined for an instant that Washington would indulge in moderate nuclear warfare in riposte.

These self-justifying wargames are dangerous. And they bring Armageddon ever closer.

Some while ago, rare earth metals important in the production of microchips, electronics and electric motors were almost exclusively sourced in China. However, as Statista’s Katharina Buchholz notes, in recent years, several nations have picked up production again while new players entered the market, diversifying it at least to some degree.

You will find more infographics at Statista

China was still responsible for almost two thirds of global production in 2019, according to the U.S. Geological Survey. But as many countries are wary of depending on China, especially when it comes to technology products, countries with rare earth deposits are likely to exploit them further. The U.S., however, is still shipping its rare earths to China for processing, but a first processing plant on American soil is in the planning stages with funding help from the U.S. army.

China also has the largest know deposits of rare earths, but Brazil, Vietnam and Russia also have a lot of (largely) untapped potential in the sector. The United States and Australia ramped up production of rare earths after 2010 and most recently, Myanmar has been mining considerable amount. As seen in the chart above, the U.S. had in the past mined and produced rare earths for military uses and re-entered the market as rare earths were getting more important as a part of the implementation of crucial technologies.