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08
DEC
11pm

Lithium rally has more room to run, thanks to US climate bill

Lithium prices have already been on a monumental tear. But if there’s one thing that the industry’s top executives agree on it’s that there’s room to go even higher.
That’s partly thanks to President Joe Biden’s signature climate and tax bill known as the Inflation Reduction Act (IRA). A key piece of the legislation is focused on bolstering production and processing for critical battery metals like lithium within the US and with countries that have free-trade agreements with Washington.
Demand for lithium is “now being regionalised, and there’s more and more regional competition for that”, said Eric Norris, lithium president of Albemarle, the world’s largest producer of the silvery white metal.
“Pricing is going to remain strong,” Norris said in an interview on the sidelines of Deutsche Bank’s 7th annual lithium and battery supply chain conference in New York. “Everybody needs lithium.”
In batteries for electric vehicles, there’s no substitute for lithium. As consumer demand surges for EVs, prices of lithium have skyrocketed to records. Production of the metal is barely keeping up with consumption after a 2018-20 market slump that undercut investment in new projects.
The IRA’s economic incentives are likely to spur domestic investment in lithium output, according to Patrick Brindle, chief operating officer of Piedmont Lithium Inc. The company received $141.7-million in US grants for projects aimed at boosting the country’s electric vehicle battery supply chain.
“We see policy changes in the form of legislation, both words and policies finally starting to take shape,” said Brindle, who also expects lithium prices to keep rising.
Read more: Democrats Supercharged EV Investment While They Had the Chance
More than $13-billion of investment in battery raw material production and battery and EV manufacturing has been announced in the less than three months since Biden signed the IRA into law in mid-August, according to Bloomberg calculations. Northvolt said last week it’s considering postponing plans to build a battery factory in Germany and will decide next year between building the factory in Europe’s largest economy or expanding first in North America.
For Albemarle, “what the IRA’s done is probably to reignite our M&A,” said Norris. The company is looking at targets in jurisdictions like Canada and Australia, which have free-trade agreements with the US, he said. BM/DM
08
DEC
10pm

Twitter to give companies more control over ads, Reuters says

Twitter will introduce new controls that allow companies to prevent their ads from appearing above or below tweets containing certain keywords, Reuters reported, an attempt to attract more advertisers back to the platform.
Since Elon Musk’s takeover of Twitter, a string of companies have suspended advertising on the social-media service, including General Mills and Pfizer. Twitter told advertisers in an email on Thursday that the new tools will be rolled out as soon as next week, Reuters said.
Musk has been trying to bring back advertisers alienated by a reported increase in hate speech and other harmful content since he acquired the platform. Two House Democrats said this week they want Musk to outline what he’s doing in response.
Musk, who has said his goal is to make the social media platform a forum for free speech, has cut more than half of Twitter’s workforce and more have resigned, complicating the company’s efforts to police harmful speech on the site. He’s also restored many users who had been previously suspended for violating policies. He’s also claimed that hate speech has lost traction on Twitter.
A Twitter representative told advertisers it was considering bringing its content moderators in-house, to expand its non-English moderation operations, Reuters said. Twitter didn’t immediately respond to Reuters’ request for comment.
Earlier this week, Musk said Apple has “fully resumed” advertising on Twitter, further de-escalating a brewing war between two of the world’s most influential tech companies.
Twitter plans to start rolling out its Twitter Blue subscription service on Friday, Reuters said. It’ll cost $7 a month on the web and $11 a month on Apple devices, it said. BM/DM
08
DEC
10pm

China’s premier vows to work with G20 on debt restructuring

Chinese Premier Li Keqiang promised the International Monetary Fund that Beijing will work with Group of 20 nations to formulate “fair and equitable” debt-restructuring plans for developing countries struggling with repayments.
The nation will implement the G20’s Debt Service Suspension Initiative in all respects, Li said in a meeting on Thursday with IMF managing director Kristalina Georgieva, according to a release from the Ministry of Foreign Affairs. China will strengthen policy coordination with all parties, including the crisis lender, to tackle global challenges such as debt, he said.
As the world’s biggest sovereign lender to developing countries, China has come under criticism for its perceived lack of participation in a global effort to lessen developing nations’ debt burdens, with US Treasury Secretary Janet Yellen saying on multiple occasions that Beijing has become the biggest obstacle to progress.
Both Georgieva and World Bank president David Malpass have long sounded the alarm about record global debt levels, particularly as monetary authorities have had to raise interest rates to quell accelerating inflation.
Distressed debt
At least 15 of the 72 emerging markets in a Bloomberg index now have dollar debt trading at distressed levels, while one estimate shows developing nations may need to find as much as $2.5-trillion over five years to meet external debt-service costs.
China’s share of official bilateral debt stock surged to 49% in 2021 from 18% in 2010, with debt-service flows to the country estimated at $17 billion in 2022 and accounting for 66% of official bilateral debt service, the World Bank said in its annual debt report published on Tuesday.
US Treasury Secretary Janet Yellen has raised concerns over China’s contributions to debt relief to Vice Premier Liu He but hasn’t seen much progress, she told reporters on Thursday. “I am hopeful that they will come to understand the necessity of relieving debt, restructuring debt when it’s unsustainable, and work with us,” said Yellen, adding that it could be a topic for future meetings, although she has no specific plans to visit China now.
The G20 set up the DSSI in May 2020 to allow some low-income countries to suspend debt-service payments after the pandemic dealt a heavy blow to their economies. China agreed to suspend repayment schedules for some nations under the initiative, which expired at the end of last year.
In November 2020, the G20 also set up a so-called Common Framework that brought together creditors such as China to provide debt relief to countries ...
08
DEC
10am

Tech Powers Stock Rebound With Technicals in Play: Markets Wrap

Stocks climbed as data showed some signs the labor market is cooling — one of the key factors Federal Reserve officials are watching to decide on whether they will be able to notch down their tightening campaign.
The rebound in the S&P 500 followed a five-day selloff that put the equity gauge on the cusp of an important technical indicator: its average price of the past 100 days. The tech-heavy Nasdaq 100 outperformed, led by gains in giants Apple Inc. and Amazon.com Inc. Treasuries also reversed course Thursday, with 10-year yields on the rise and approaching the 3.5% mark. Oil rallied amid an outage on a major US oil pipeline and optimism over China’s reopening.
Continuing US jobless claims rose to the highest since early February, suggesting that Americans who are losing their job are having more trouble finding a new one. Traders are now waiting Friday’s producer price index for November — one of the final pieces of data Fed policymakers will see before their Dec. 13-14 policy meeting. The PPI in October cooled more than expected.
“It’s interesting to see jobless claims rising slightly, but in all likelihood this won’t move the market needle too much,” said Mike Loewengart at Morgan Stanley Global Investment Office. “Investors will have a lot to digest these next few days as they get a clearer picture of where we stand in the fight against inflation before the Fed decision. The market is largely expecting the slowdown in rate hikes to begin next week, but whether the pivot will be enough to steer the economy into a soft landing remains the question.”
Read: Fed Gets a Win Deflating Asset Bubbles Without Financial Crash
Strategists from Morgan Stanley to JPMorgan Chase & Co. have warned investors against piling back into risk on hopes the Fed is getting close to pivoting to easier policy.
“Presumably if the Fed is pivoting this time around, it’s not for a good reason. It’s a deteriorating fundamental picture,” Joyce Chang, chair of global research at JPMorgan, told Bloomberg Television. “I mean, is that really a reason to be buying risk? I think it’s premature to say that there is a Fed pivot.”
Besides the 100-day moving average, the S&P 500 is trading near a key support at 3,900, a level that has provided the pivot point for reversals on multiple occasions this year.
As the equity market rebounded, the Cboe Volatility Index fell to around 23. Yet ...
08
DEC
10am

Eskom Debt Among Worst Hit in EM on South Africa Political Drama

Eskom Holdings SOC Ltd.’s bonds are some of the worst performing developing-nation debt so far this month amid concern Cyril Ramaphosa will be removed as president of South Africa.
The embattled company’s dollar-denominated bonds maturing in 2025, 2027 and 2028 are all among December’s biggest laggards in the Bloomberg Emerging Markets Hard Currency Aggregate Index, which has 2,100 members.
In particular, yields on the state-run power utility’s 2025 notes have climbed on eight of the past nine days, surging 137 basis points. Those on similarly dated South African sovereign dollar bonds have also risen, but by a much more moderate 19 basis points.
The gap may point to idiosyncratic risk surrounding Eskom, according to Jones Gondo, a Johannesburg-based credit research analyst at Nedbank Ltd.
“Clients are concerned about policy continuity given that Eskom/Energy sector reform measures are underway with high execution risk and which have been propelled primarily from the President’s Office,” said Gondo.
Eskom has debt of about 400 billion rand ($23 billion) and is also struggling to supply enough electricity from its fleet of old and poorly maintained power plants to meet demand — blackouts were at the sixth level of an eight-grade scale on Thursday. South Africa in October said it may shift as much as two-thirds of that debt on to its own balance sheet, with strict conditions.
Ramaphosa has announced a series measures to try and address the country’s energy crisis. But he is now fighting calls for his impeachment over a scandal surrounding the theft of at least $580,000 in cash stashed in a sofa at his game farm.
Another factor weighing on Eskom bonds could be worries about large losses at the company, with delayed financial results now expected by Dec. 31.
“Together with the debt restructure coming,” this could see investors “trimming risk exposure to Eskom, all things considered,” Nedbank’s Gondo said.
Read more: Why Blackouts Are Still Crippling South Africa: QuickTake
Eskom’s Restated 2021 Loss Widens to Record $1.5 Billion
South Africa Rules Out Asking Eskom Bondholders to Take Haircuts
What to Watch for Next in South Africa’s Cash-in-Sofa Scandal
Ramaphosa’s political future was cast in doubt on Nov. 30 when an advisory panel issued a scathing assessment of the president’s handling of the 2020 theft. After initially considering resigning, he is now contesting the report in court and has been given assurances by the governing African National Congress that its lawmakers will reject the findings when the matter is debated in parliament on ...
08
DEC
10am

Tesla to Shorten Shanghai Factory Shifts, Delay New Hires

Tesla Inc. will shorten production shifts at its Shanghai factory as soon as Monday and has delayed the on-boarding of some new hires, people familiar with the situation said — adding to signs demand for the company’s electric cars in China isn’t meeting expectations.
The plant will operate two 9 1/2-hour shifts per day, down from two 11 1/2-hour shifts currently, according to the people, who asked not be named because the information isn’t public. The change is scheduled to take place from Monday, according to a production schedule seen by Bloomberg News, though it may be subject to some last-minute adjustments, the people said. The shorter shifts will lead to reduced monthly pay for production staff, they said.
Tesla shares slipped 1.3% at 8:28 a.m. in early New York trading, on pace to extend this week’s losses, after earlier falling as much as 2.3%.
Earlier this week, Bloomberg reported that Tesla plans to cut production this month at the Shanghai factory across the Model Y and Model 3 production lines by about 20%. A Tesla representative said it was “untrue” the carmaker planned to cut output, without elaborating.
Separately, the on-boarding process of some new hires has been suspended, other people said. Some production staff who were slated to start in November, including in Tesla’s battery workshops and on vehicle assembly lines, were informed by the company their start dates would be delayed. One of the people said they were told by Tesla’s recruiter to be prepared for to start after the Chinese New Year holiday, which falls at the end of January, because there isn’t an urgent need for more workers right now.
A Tesla representative in China declined to comment Thursday.
After enjoying a dream start in China, Elon Musk’s EV pioneer is now facing tougher competition from local electric-car makers in the word’s biggest auto market. Recent price cuts and incentive offers signaled demand isn’t keeping up with increased supply after an upgrade of the factory boosted capacity to around 1 million vehicles a year. On Wednesday, Tesla offered 6,000 yuan ($860) subsidies to customers who buy and take delivery of new cars this month, suggesting it has stock to clear.
China is key for Tesla, and continued growth in the world’s biggest EV market is crucial for achieving Musk’s goal of 50% annual growth globally for years to come.
The pullback in Shanghai comes as Tom Zhu, the longtime Tesla executive who oversaw ...
07
DEC
11pm

Big Oil betting billions on global ‘climate catastrophe’

The world’s biggest oil producers are spending billions of dollars on fossil fuel projects that will only be needed if the world misses key climate goals, according to Carbon Tracker, a nonprofit think tank.
Companies invested $58-billion in oil and gas projects in 2021 and 2022 that will only be required if fossil fuel demand grows to a level at which scientists forecast a “climate catastrophe”, the London and New York-based researcher said in a report. They may pull the trigger on a further $23-billion of investments next year that would help warm the planet more than 2.5°C above pre-Industrial levels, said the report, titled “Paris Maligned”.
Big Oil’s capital spending on new projects has become a crucial balancing act. Investing in long-term projects bolsters energy security at a time when state producers like Russia have shown willingness to weaponise their supplies but can also lock in emissions for decades to come, furthering the risk of irrevocable climate change.
Even climate-friendly Democrats including President Joe Biden have been calling for more oil production this year as fuel prices spiked following Russia’s invasion of Ukraine. Industry executives including Chevron CEO Mike Wirth criticised the whiplash of being told to stop and start production, saying such policies inhibit long-term investment.
“Investors must scrutinise company spending plans as investments in many new oil and gas projects lock in future emissions that are incompatible with Paris,” report co-author Mike Coffin said in a press release in reference to the Paris Agreement on climate change.
Most international oil companies have cut their long-term capital spending plans since the pandemic as they focus on returning cash to investors over new production.
Exxon is due to publish its capital budget for next year on Thursday. Chevron said on Wednesday it will allocate an extra $2-billion to capital spending next year at $17-billion. BM/DM
07
DEC
10pm

The UK workforce is becoming less appealing to global bosses

The UK is failing to develop a skilled and globally desirable workforce, with domestic talent increasingly less attractive to overseas businesses, according to a new survey of international executives.
Economic problems in the aftermath of Brexit, as well as turbulence in British politics, means the UK and its workforce is less appealing to global business, the poll of over 5,000 executives by the Institute for Management Development showed.
The UK is now ranked 28th of 63 countries on the organisation’s World Talent Ranking, which considers talent creation and retention. That’s down seven places from a year ago, the IMD said.
Britain is facing economic problems on many fronts. The economy is widely thought to be in recession, inflation is at four-decade highs, while strikes by public sector and other essential workers are causing widespread disruption to services, and rising interest rates are prompting a downturn in the housing market.
Growing economic inactivity in the UK means the labour market remains tight, with 600,000 more people no longer employed or looking for a job compared to pre-pandemic. Economist Nouriel Roubini said this week that the country “is already in a severe stagflation”, a situation he partly attributed to Brexit.
Against that backdrop, confidence in Britain to provide a stable backdrop for business appears to be decreasing. The IMD report noted that declining standards of education and the quality of life in the UK are making business leaders sceptical about its ability to produce a skilled workforce.
“This is a concerning situation for the UK with no quick fix,” said Professor Arturo Bris, Director of the IMD World Competitiveness Centre.
“Until the UK is able to deal with the turmoil in its politics and markets which has dominated recent years and take action to revamp its domestic situation, it will be unable to attract or retain the talent it needs to restart growth and drive innovation.”
Switzerland took top spot in the IMD’s rankings for the sixth consecutive year. Sweden, Iceland, Norway and Denmark made up the rest of the top five. BM/DM
07
DEC
10pm

Stocks mixed on China reopening, recession fears: markets wrap

Stocks in Asia fluctuated following signs China would further relax its Covid restrictions, while Treasuries flashed warning signs of recession. The dollar strengthened in an indication of demand for havens.
Equities in Japan, Australia and South Korea dropped, along with futures for US and European benchmarks. Stocks in Hong Kong rose after media reports that mask-wearing requirements would be scrapped. Shares in mainland China seesawed.
The dollar resumed gains after a small decline on Wednesday. The offshore yuan held below the 7 level to the greenback as investors continued to balance China easing Covid restrictions and a dimming outlook for the global economy.
Bonds rose in Australia, with the 10-year yield falling 3 basis points to 3.33%. Treasury yields of the same maturity rose after a sharp decline in the prior session.
Chinese regulators asked the nation’s biggest insurers to buy bonds being offloaded as retail customers pull their cash from fixed-income investments, according to people familiar with the matter.
Iris Pang, chief economist for Greater China at ING Groep NV, said China’s economy would face further strain next year despite relaxed Covid restrictions.
“The manufacturing sector in 2023 is not going to look good because of the very weak export sector and a likely recession in the US and Europe,” she said in an interview with Bloomberg Television. “We can’t be too optimistic for retail sales to boost growth in 2023. It may happen in the second half but not in the first half.”
Elsewhere in markets, oil rose after a four-day drop as investors weighed the impact of China’s moves to ease virus curbs against a looming US slowdown.
Gold was little changed after rising 0.9% in the previous session on weakness in Treasury yields, with traders looking to Friday’s US producer price report to gauge the Federal Reserve’s next monetary policy moves. BM/DM
07
DEC
11am

Oil Halts Losses as China Covid Shift Reduces Demand Concerns

After three days of big losses, the oil market is finally taking a bit of a breather. Prices drifted within little changed territory as traders took a pause to assess whether further signs of China’s economy reopening could help support demand.
West Texas Intermediate traded near $74 a barrel. China eased a range of Covid restrictions on Wednesday, and the world’s top crude importer was also said to be shifting focus to the economy, with a growth target of about 5% under consideration. A softer dollar was also supportive for commodities priced in the currency.
Meanwhile, the American Petroleum Institute reported that US stockpiles decreased by more than 6 million barrels last week, according to people familiar with the figures. Official inventories data follow later Wednesday.
Crude has so far stumbled into the final month of the year, with the US benchmark heading for the first back-to-back quarterly drop since mid-2019 as central banks tighten monetary policy. Concerns about the global growth outlook, alongside a soft physical market and falling liquidity have weighed on prices.
The latest leg down came at a complex moment, with traders assessing the fall-out from Group of Seven curbs on Russian oil, including a price cap that’s meant to punish Moscow for the war in Ukraine.
“Inventories remain quite low, spare capacity is tight,” Francisco Blanch, head of commodity and derivatives research at Bank of America said in a Bloomberg TV interview. “All the demand growth that we forecast for next year is coming from emerging markets.”
Prices:
WTI for January delivery was up 25 cents to $74.50 a barrel at 10:15 a.m. in New York.
Brent for February settlement rose 42 cents to $79.77 a barrel.
In response to the cap, which has been set at $60 a barrel, Russia is considering setting a price floor for its international oil sales. Moscow may either impose a fixed price for the nation’s barrels, or stipulate maximum discounts to international benchmarks at which they can be sold.
Related coverage:
China Oil Imports Jump as Refiners Tap Global Products Demand
US Sees Record 2023 Oil Output in Reversal After Cutting Outlook
US Crude Exports Jump to Monthly Record on Strong Demand
Slovak Oil Refiner Targets Seaborne Crude Market in Russia Pivot
Xi Jinping Gets Saudi Red Carpet as Middle East Looks Past US
07
DEC
10am

The Developing World Is Facing a $2.5 Trillion Debt Shock

Developing nations may need to find as much as $2.5 trillion over five years to meet external debt-service costs as interest rates rise and poorer countries struggle to refinance borrowings, a Finance for Development Lab model shows.
The findings published by the Bill & Melinda Gates Foundation-backed and Paris-based think tank assume interest rates climbing by 400 basis points from levels in 2019 and a 10% decline in currencies against the dollar. It assessed conditions in 113 countries, with China and Russia among nations excluded because data weren’t available.
“Current costs of funding make debt service hard to sustain, with an expected peak in 2024-25,” according to the authors of a paper based on the model titled The Coming Debt Crisis. “If such conditions were to hold, a significant liquidity crisis would quickly turn into a widespread solvency crisis.”
Developing nations, with weaker sources of revenue, have borne the brunt of surging interest rates and increased borrowing, a result of shocks including the Covid-19 pandemic and Russia’s invasion of Ukraine, which has driven up world food and energy prices. A greater proportion of poorer-country debt is now owed to commercial lenders, which offer shorter maturities, and capital markets have largely closed to many governments.
Total debt stock for those nations is expected to surge to $4.3 trillion in 2026 from $2.9 trillion last year and $2 trillion in 2016, said Charles Albinet and Martin Kessler, the authors of the paper.
Read More:
Poorest Nations’ Debt-Service Payments Surge 35% to $62 Billion
Facility to Help Ease African Debt Crises Launched in France
Gates-Backed Think Tank Seeks $50 Billion for Africa Debt
Under the scenario, 35 countries would cross what they said were “debt-service risk thresholds,” compared with 22 currently, and the number in sub-Saharan Africa would jump to 18 from 10.
Lower-middle income, a category that includes nations ranging from Ghana to El Salvador, would see their median debt-service-to-revenue ratio rise to 15% from 10% in 2020, an amount that for some nations would exceed their health and education budgets.
Some may hit so-called debt walls as payments come due. Sub-Saharan Africa, excluding South Africa, will see an increase in eurobond redemptions to between $9 billion and $10 billion in 2024 and 2025 compared with $2.5 billion in 2019. Latin American nations will need to pay out $17.5 billion in redemptions in 2025, up from $9 billion in 2023.
“If current conditions were to continue, a generalized debt crisis could materialize, especially in ...
06
DEC
11pm

Global markets: European markets slip, China eases pandemic measures

European stock indexes were mostly lower on Monday, finding little support from an easing of China’s domestic pandemic restrictions, after market sentiment was dampened by US jobs data on Friday that raised fears of persistent inflation.
Asian shares had been boosted early on Monday by hopes that China’s steps to ease its Covid-Zero policy would support global growth and increase commodity demand.
More Chinese cities announced an easing of Covid-19 measures on Sunday, after protests against the restrictions last weekend. The news boosted Chinese stocks and pushed the yuan past 7 per dollar. MSCI’s broadest index of Asia-Pacific shares outside Japan was up 1.7%.
But the impact on European markets was limited as investors were cautious about the extent of the reopening and remained focused on the outlook for central bank rate hikes. The MSCI world equity index, which tracks shares in 47 countries, was up just 0.3% on the day.
Europe’s STOXX 600 was down 0.3%, Germany’s DAX was down 0.6% but London’s FTSE 100 was up 0.2% .
“I think for an amount of time we won’t know the real definition of [Covid-Zero] because it has been changing and evolving very very quickly in the last two weeks,” said Eddie Cheng, head of multi-asset portfolio management at Allspring Global Investment.
The new easing “could add to a stronger demand for raw materials but we also need to see . how it evolves”, Cheng said.
China’s Covid-Zero policies have weighed heavily on the world’s second-largest economy. Services activity shrank to six-month lows in November.
Market sentiment in Europe is still under pressure from “some inflation forces”, Cheng said, in particular the region’s energy crisis.
Eurozone business activity declined for a fifth month in November, final PMI data showed, suggesting the economy was sliding into a mild recession.
November’s robust US payrolls report knocked Wall Street on Friday as it challenged hopes for a less aggressive stance by the Federal Reserve.
Futures for the S&P 500 and Nasdaq were down around 0.5% EScv1, NQcv1 as investors waited for more data to provide clues on the Fed’s next move.
The euro was up 0.3% against the dollar, at around $1.05735, while the US dollar index was down 0.1% at 104.31, having recovered after optimism about China’s lockdown-easing sent it to five-month lows earlier in the session.
Eurozone government bonds yields slipped, with the benchmark German 10-year yield at 1.837%.
The European Central Bank should raise interest rates by 50 bps on 15 December, French central ...

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