Trump: Powell Crooked Or Incompetent; Iran Protests | Horizons Middle East & Africa 1/14/2025

Horizons Middle East & Africa - Summary (January 26, 2024)

Key Concepts:

• Geopolitical Risk: Focus on Iran protests, potential U.S. intervention, and regional stability.
• Market Performance: Analysis of U.S., Asian, and European markets, including impacts of earnings reports and economic data.
• Monetary Policy: Discussion of U.S. inflation data, potential Fed rate cuts, and Trump’s criticism of Jerome Powell.
• Trade & Investment: New economic partnership between Nigeria and UAE, and the impact of Trump’s policies on trade.
• Earnings Season: Initial reports from JP Morgan and expectations for other major banks.
• AI & Tech Investment: Focus on the growth of AI-related spending, particularly in the U.S. and China.

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1. Market Overview & Economic Data

The broadcast began with a market snapshot, noting a slight dip in Wall Street following JP Morgan’s earnings report (down 4%), which disappointed on underwriting fees. S&P futures were just shy of 7000. Asian markets showed mostly positive performance, driven by China’s strong export numbers (up 6.6% year-over-year, resulting in a record $1.2 trillion trade surplus in 2023) and speculation around a potential snap election in Japan (Nikkei 225 up over 1%). Core CPI data in the U.S. came in slightly lower than expected, easing inflationary pressures and leading to approximately 50 basis points of rate cuts priced in for 2024. Precious metals, particularly silver (breaking $90/ounce for the first time) and gold, continued to benefit from geopolitical uncertainty and questions surrounding Section 232 tariffs.

2. U.S. Monetary Policy & Political Interference

President Trump continued his criticism of Federal Reserve Chairman Jerome Powell, calling him “crooked or incompetent” in relation to the DOJ’s Fed probe. He announced plans to nominate a replacement within weeks. The broadcast highlighted the potential difficulty of confirming a new nominee given the backlash against the investigation, citing Senator Thom Tillis’s opposition. Trump also touted low inflation figures as justification for rate cuts. The impact of potential fiscal spending under a second Trump administration was discussed, with a distinction made between the U.S. and European economies in terms of growth potential. Deutsche Bank’s Global CIO, Christian Nolting, emphasized a “discipline beats drama” approach, noting positive earnings expectations and macro backdrop despite geopolitical events.

3. Geopolitical Tensions: Iran & Regional Stability

A significant portion of the broadcast focused on the situation in Iran. President Trump urged Iranians to continue protesting the regime and promised “help is on the way,” leaving the nature of that assistance ambiguous. Georgetown University Professor Mehran Kamrava cautioned against U.S. military intervention, arguing it would likely validate the Iranian government’s narrative and could lead to escalation through missile attacks on regional U.S. assets. Qatar’s Foreign Ministry also warned of catastrophic consequences from U.S. involvement. Trump suggested his next move would depend on receiving accurate numbers regarding the killing of protestors.

4. Asia-Pacific Markets & Economic Developments

Winnie Hsu, reporting from Hong Kong, detailed the positive performance of Asian stock markets, particularly in Japan (Nikkei 225 up 1% due to the snap election speculation). However, she noted concerns about fiscal risks associated with Prime Minister Kishida’s policies, reflected in a rising five-year yield. China’s strong export figures were highlighted, but also the ongoing imbalance between manufacturing capacity and domestic demand. China raised margin financing ratios to curb market risks. The weakening Japanese Yen and Yuan against the dollar were also noted.

5. Nigeria-UAE Economic Partnership & Investment

Nigeria’s Minister of Industry, Trade and Investment, Olajumoke Omoniyi Oduwole, discussed the newly signed economic partnership agreement with the UAE. The agreement aims to deepen trade ties, attract foreign investment in sectors like renewable energy and aviation, and promote digital trade. The Minister emphasized Nigeria’s focus on non-oil export diversification and the importance of reforms to attract FDI, noting the country’s strong stock market performance.

6. Bank Earnings & Regulatory Concerns

The broadcast covered the initial reactions to JP Morgan’s earnings report, highlighting a surprise miss in investment banking revenue despite strong trading performance. The potential impact of President Trump’s proposed 10% cap on credit card interest rates and swipe fees was a major concern, with JP Morgan’s CFO calling it “bad for consumers and very bad for the economy.” The broadcast anticipated similar discussions during earnings reports from Bank of America, Wells Fargo, and Citi.

7. Greenland & Arctic Security

Briefly, the broadcast mentioned Greenland’s Prime Minister ruling out joining the U.S., preferring to remain within the Kingdom of Denmark. European countries are discussing a military presence in Greenland to demonstrate commitment to Arctic security, a move dismissed by President Trump.

Notable Quotes:

• Christian Nolting (Deutsche Bank): “Discipline beats drama.”
• Mehran Kamrava (Georgetown University): “The best thing the United States can do is really to sit aside and let events take the course.”
• Jeremy Barnum (JP Morgan CFO): (Regarding Trump’s proposed rate cap) “Bad for consumers and very bad for the economy.”

Technical Terms:

• CPI (Consumer Price Index): A measure of the average change over time in the prices paid by urban consumers for a basket of consumer goods and services.
• Basis Points: A unit of measurement used in finance to describe the percentage change in an interest rate or yield. 100 basis points equals 1%.
• Section 232 Tariffs: Tariffs imposed by the U.S. government on imported steel and aluminum, citing national security concerns.
• Net Interest Income: The difference between the revenue a bank earns from its lending activities and the expenses it pays to depositors.
• Snap Election: An election called before the end of a legislature's fixed term.

Conclusion:

The broadcast painted a picture of a complex global landscape characterized by geopolitical tensions, fluctuating markets, and evolving economic policies. The situation in Iran remains a key concern, with the potential for escalation. While economic data suggests some easing of inflationary pressures, the impact of political interference and potential regulatory changes (like the proposed credit card rate cap) adds uncertainty to the outlook. Nigeria’s efforts to diversify its economy and attract foreign investment through partnerships like the one with the UAE offer a positive note, but require continued reforms to fully realize their potential.