Euroclear warns EU that Russian frozen asset plan could lead to higher borrowing costs • FRANCE 24

Key Concepts

• Frozen Russian Assets: Assets belonging to the Russian state that have been immobilized by international sanctions following the invasion of Ukraine.
• Euroclear: A Belgian-based financial services company that holds a significant portion of the frozen Russian assets within the EU.
• Sovereign Bond Spreads: The difference in borrowing costs between different countries' government bonds, often used as an indicator of perceived risk.
• Ransomware Attack: A type of cyberattack where malicious software encrypts a victim's data, and the attackers demand a ransom for its decryption.
• Loss Leader: A product sold at a loss to attract customers, with the expectation that they will purchase other, more profitable items.
• Inflation: A general increase in prices and fall in the purchasing value of money.
• Aven Flu: Avian influenza, a disease that can affect poultry and has implications for the food supply chain.

EU's Plan for Frozen Russian Assets and Market Concerns

The European Union is considering a plan to utilize approximately 140 billion euros from Russia's frozen assets to support loans for Ukraine. However, Euroclear, a major financial institution holding these assets in Belgium, has issued a warning. According to a letter from Euroclear CEO Valeriane de Viron to EU Commission Chief Ursula von der Leyen, this move could destabilize markets and increase borrowing costs for EU member states. The concern is that using these assets might make Euroclear liable for claims of confiscation, leading to a "sustained increase in European sovereign bond spreads," which refers to higher borrowing costs for all member states relative to other nations. This development comes as Ukraine peace negotiations have been revived, with initial proposals suggesting the use of frozen Russian assets for US-led investment funds in Ukraine. The EU has frozen around 210 billion euros in Russian state assets, with about 185 billion euros held at Euroclear. The EU maintains that its loan plans do not constitute confiscation.

Global Market Performance

The Thursday trading session on major European stock exchanges opened relatively quietly. Investors are pausing after recent gains, which were fueled by expectations of a US Federal Reserve interest rate cut in December. In Asia, the Nikkei in Japan closed firmly in positive territory, driven by tech stocks. Conversely, Chinese stocks traded flat to lower, following a significant drop of over 5% in industrial profits in October compared to the previous year.

Toyota Shares and Trade Tariffs

Toyota shares closed slightly lower despite the company reporting increased sales in October. Demand from the US compensated for a slump in China and Japan. This performance occurred despite former President Donald Trump's proposed 15% tariff on imported cars and car parts.

Asahi Beer Cyberattack

Japanese beer giant Asahi is still recovering from a major cyberattack in September. A ransomware group disrupted operations across all of Asahi's Japanese factories, forcing employees to resort to manual order-taking. Executives revealed that the hack may have leaked the personal details of over 1.5 million customers, including names, gender, addresses, and contact information. Credit card details were not compromised, and the impact was confined to Japan. Asahi, which holds about 40% of Japan's beer market, has spent nearly two months containing the attack, restoring systems, and enhancing security. They anticipate returning to normal delivery levels by February. While a group named "Kin" has claimed responsibility, Asahi states they have not been in direct contact with the attackers, received demands or threats, or paid any ransom.

Thanksgiving Feast Costs and Inflation

In the United States, Thanksgiving is a time for family gatherings and elaborate meals. In recent years, the cost of these feasts has become a significant concern due to inflation impacting consumer spending. The holiday is now viewed as an indicator of US grocery prices. However, accurately tracking these price changes is complex.

Consumer Struggles and Official Statements

While some US shoppers may be experiencing relief from easing inflation, many are still finding it difficult to afford traditional Thanksgiving meals, leading some to rely on food banks. One individual stated, "I had to find a pantry because, you know, food is coming up so expensive and I got family to take care of, man. There's too many bills coming in." Former President Donald Trump has claimed credit for lowering grocery prices, citing Walmart's Thanksgiving dinner price as 25% lower than last year. However, this comparison is based on a reduced number of items.

Grocery Price Trends and Turkey Market

Overall, US grocery prices have increased by 1.4% in the most recent quarter and are 2.7% higher than a year ago. Turkey prices have bucked this trend, with national brand retail prices down 3.7%. However, wholesale turkey prices have risen by approximately 40%, partly due to supply issues linked to avian flu outbreaks. Retailers often use whole turkeys as "loss leaders" – products sold at a loss to attract customers to other profitable items. Despite potential price increases over the past couple of years, consumers can expect promotions and sales as the holiday season progresses.

Conflicting Cost Estimates

Estimates for the average cost of Thanksgiving vary. Wells Fargo predicts a 2% to 3% decrease this year, while accounting firm Deloitte suggests a 0.6% to 0.10% increase. Recent polls indicate that grocery prices remain a top economic concern for Americans.