On the afternoon of August 4, there was a massive explosion at the Port of Beirut. The explosion was one of the largest non-nuclear blasts in history, a seismic event with a magnitude of 3.3 on the Richter scale. At latest count, 220 have been confirmed dead, 110 are missing, and over 6,000 were injured.
The Middle East is undergoing significant change. The U.S. is clearly reducing its footprint, leading nations within and outside the region to adapt. The explosion occurred amid this evolving environment and it has the potential to be a catalyst to accelerate changes.
In this report, we will begin by detailing the event, followed by an examination of Lebanon’s political and economic backdrop to frame how these conditions contributed to the accident. The third section will discuss the U.S. withdrawal and the scramble by players both inside and outside the region to gain control or protect their interests. This discussion includes a look at the states affected by the machinations of others. As always, we conclude with market ramifications.
Happy Monday. Equity markets are higher this morning as the S&P 500 slowly trends toward a new high. Foreign news leads off our comments this morning, with a special focus on Belarus. China news is next, followed by market and economic news. We close with the pandemic update. Here are the details.
Foreign news:
The turmoil in Belarus continued over the weekend. Here is what we are following:
Lukashenko has requested support from Putin. The two nations have a mutual defense pact, which means they will defend each other against a foreign invader. Russia has indicated it was prepared to protect Belarus from outside influence, but Russia is not obligated to protect Lukashenko from his own people. There are reports of military exercises on the Russian/Belarus frontier, but we doubt that Putin wants to directly intervene. Unlike Ukraine, which was showing clear signs of leaning to the West, Lukashenko was constantly trying to extract resources from both sides. In addition, there is little evidence in the protests that there is anger at Russia. From Putin’s perspective, it is unlikely that Belarus will leave Russia’s orbit with or without Lukashenko. If a reasonable replacement is found, we suspect Putin will be fine with Lukashenko heading to retirement.
Meanwhile, NATO, the EU and the U.S. have been mostly quiet. The EU is threatening sanctions, but we doubt the West will directly intervene.
Although U.S./Russian relations remain fraught, one thing remains the same. Wealthy Russians still like being in assets other than rubles; so far this year, capital flight is up 53%.
Thailand is seeing widespread protests against both the government and the king. Protests against the royal family are rare. The former sovereign, King Bhumibol Adulyadej, was generally revered and was careful about his intervention into politics. He died in 2016. His son, Maha Vajiralongkorn, is not well liked. Thailand has unusually strict lèse-majesté laws, which make it illegal to publicly criticize the king. The protesters could be imprisoned under these laws. There has been political tension between the city dwellers and rural voters for the past two decades. The latter have supported the Shinawatra family, who were prime ministers in 2001-06 and 2011-14 and have been ousted by the royal family and the military. The Shinawatra governments supported redistribution to the countryside. They have been opposed by the established political power, which resides in the cities, the military and the royal family.
China news:
The U.S. and its allies are conducting massive military exercises in the South China Sea this week. Unfortunately, the Philippines won’t be participating; President Duterte is attempting to straddle the U.S. and China and wants to avoid a confrontation with Beijing. Losing the Philippines makes containing China within the first island chain difficult.
Scheduled meetings to monitor the Phase One trade deal were postponed. Although an official reason wasn’t proffered, it is “Beidaihe season” in China. Beidaihe is a seaside resort in China where CPC leaders meet quietly every August to discuss policy matters. The resort was a favorite of Mao’s, and the tradition continues. It does appear that Chinese leaders were preoccupied with these meetings, which is probably why there were delayed. No new dates have been set.
China and Russia are increasingly using currencies other than the dollar to settle trade. The use of the dollar is now under 50%. The EUR is now up to 30%, while national currencies represent 24%. Both nations are facing U.S. sanctions. Although this diversion could weaken dollar demand, it could also increase Moscow’s dependence on Beijing, something that history would suggest is a problem for Russia.
It has been noted that gold prices have been rising. Gold miners are doing well, but report that the costs of new mines are rising. This increase in cost is leading companies to be cautious about projects, worried that future prices won’t support a high cost mine. Of course, this reluctance is bullish as it means less new gold will be on the markets even at historically high prices.
COVID-19: The number of reported cases is 21,707,773 with 775,926 deaths and 13,690,055 recoveries. In the U.S., there are 5,404,115 confirmed cases with 170,052 deaths and 1,833,067 recoveries. For illustration purposes, the FT has created an interactive chart that allows one to compare cases across nations using similar scaling metrics. The FT has also issued an economic tracker that looks across countries with high frequency data on various factors.
Novavax (NVAX 146.51) announced that its vaccine is beginning Phase 2 trials and could begin Phase 3 trials by late September. The company will be conducting its trials in South Africa due to the surge of cases in that country. In fact, for trials, a high rate of infection makes a country attractive. Brazil, with high infection rates and a strong public health system, is increasingly looking like a good country for experimental treatments.
There is growing evidence that containing the virus once doesn’t mean the problem is resolved. Both South Korea and New Zealand are reporting new outbreaks.
Happy Friday! It looks like a risk-off morning. Foreign news is the opening focus—the U.S. has engineered the UAE’s recognition of Israel, only the third nation in the region (Jordan and Egypt are the others) to grant formal recognition. China news comes next, in which Chinese concerns about financial sanctions and threats to Taiwan dominate. We update the virus news and close with economics and markets. Being Friday, the new Asset Allocation Weekly is available, along with the podcast and chart book; the topic this week is precious metals. Here are the details.
The next step is to see if other Persian Gulf states follow the UAE’s lead. Pressure on Riyadh will be elevated. If normalization becomes a trend, the agreement with the UAE would be the most significant in history.
So, what’s the bigger picture here? The driving force behind this outcome, in our opinion, is the U.S. reducing its geopolitical footprint in the region. A key “known/unknown” is how the world acts as the U.S. pulls back. S. hegemonic management after WWII assumed that three “hot spots” would require constant U.S. engagement to prevent an outbreak of hostilities. These areas were Europe, where the German problem had to be managed, the Far East, where the endemic conflict between Japan and China had to be quelled, and the Middle East, where a colonial legacy left states designed to be unstable. Optimists believe that if the U.S. pulls back from these hot spots, Japan and China will work out their differences, German regional hegemony in Europe will be beneficial, and the Middle East will adjust without going to war. Pessimists expect that optimists are falling into the trap of mistaking hope for a plan.
As the U.S. withdraws from the Middle East, the nations there need to figure out how to counteract Iran’s malign influence, control Turkish ambitions, and manage outside actors, such as Russia. Israel and the Gulf States have mutual interests—they all want to contain Iran, are uncomfortable with Russia, and have enough memories of the Ottomans to want to keep the Turks at bay.
As long as the U.S. was guaranteeing security, these nations could avoid uncomfortable compromises. But if that guarantee is fading, the Arab States and Israel have an urgency to make common cause.
And so, this agreement is a “win” for the optimists. And, it allows the U.S. to focus its efforts on China.
A theme we have held for a while is that if U.S./Chinese economic relations are set to fray, Mexico should be a major beneficiary. Although there is clear evidence of pressure, most U.S businesses, so far, are trying to keep their ties to China. In addition, AMLO’s government in Mexico has not been considered “business friendly” and his management of the economy and the pandemic have been a disappointment. Mexican equities have tended to underperform; over the past five years, the iShares Mexico ETF (EWW, 34.14) is down 37.1% compared to the S&P over the same time frame, which is up 61.6%. However, at long last, perhaps Mexican leaders are starting to see their geographic advantage―reports suggest Mexico is working actively to lure U.S. firms that are considering leaving China.
U.S. and Chinese officials will meet tomorrow to update the Phase One trade deal. It looks like there is little chance China will meet its obligations, but it doesn’t appear that either side wants to scuttle the arrangement. Thus, we expect a smooth meeting with lots of promises. An actual break in the deal would be a shock.
COVID-19: The number of reported cases is 20,950,402 with 760,235 deaths and 13,015,379 recoveries. In the U.S., there are 5,254,878 confirmed cases with 167,253 deaths and 1,774,648 recoveries. For illustration purposes, the FT has created an interactive chart that allows one to compare cases across nations using similar scaling metrics. The FT has also issued an economic tracker that looks across countries with high frequency data on various factors. The Rt data shows 28 states with a reading less than one, a positive development. The lowest state is Maine, while the highest is Hawaii.
One of the frustrating elements of this virus is that we are all learning on the fly. There is a tendency to try to project facts off limited data. One of the items that has been noted is that children, for the most part, seem to be less affected by COVID-19. That isn’t to say all are safe from it, and it says nothing to the issue of carrying the virus to others. The effects on children are critical to the reopening of schools. A new datapoint seems to suggest that minority children may be at greater risk to the virus, which complicates the reopening issue.
A vaccine is the most likely path to normalization. This report highlights the difficulties in producing and distributing a vaccine once one is developed.
Market and Economic news:
The recent executive order about suspending the payroll tax is increasing uncertainty for businesses. Since the tax is only deferred, businesses are not sure if they should continue to collect it or give it to their workers only to take it back in a lump sum early next year. This was clearly not the intent of the order, but it does show the difficulty of governing without legislation.
[1] Egypt was the most significant military threat to Israel; the normalization between Israel and Egypt meant that the former didn’t need to worry about its southern border and the latter could operate in the Sinai without risk.
Precious metals prices have risen recently, making new highs.
(Source: Barchart.com)
This is a monthly chart for the nearest gold futures contract. As the chart shows, we have recently moved above the 2011 highs. In this report, we will discuss two areas that have supported this rise—the prevalence of negative real interest rates and a potential short squeeze on the futures market.
The Treasury Inflation Protected Securities (TIPS) are designed to provide protection against rising inflation. The security has a component where its value rises when inflation increases. It is possible to compare the Treasury yield relative to the TIPS yield to determine the “break-even” inflation rate; in other words, this is the market’s expectation of future inflation.
Note that the 10-year TIPS yield is now negative and the nominal yield on the 10-year T-note is mostly steady. To some extent, this suggests the market believes the Fed is already engaging in yield curve control. The combination of a falling real yield and a steady nominal yield means inflation expectations are rising.
These charts show there is a close relationship between the real 10-year yield and gold prices. In fact, they correlate at the -88.9% level.
The second factor is a potential short squeeze in gold.
Recently, we have seen a rapid rise in gold delivery at the COMEX. Perhaps the most sophisticated process of buying gold is to buy a futures contract and take delivery. The buyer accepts a warehouse receipt at the COMEX exchange and pays a modest monthly fee for storage. The holder of the warehouse receipt can then short the futures and deliver the warehouse receipt back into the market when they decide to sell their holdings. This process solves a persistent problem for precious metals buyers—the transaction spread is narrow and the prices are fully transparent. The drawback for most investors is the 100 oz contract at the COMEX, which is a commitment beyond that of the small investor. Swap dealers who make markets between physical gold and the futures markets are not accustomed to this level of delivery and may have been caught short; if so, they will need to buy gold to deliver gold on their short positions. That may account for the recent strength we have seen in the market.
The summer doldrums are upon us. Equity markets are mostly steady, with the dollar weakening. We detail the claims data below, but they are showing improvement. We lead with market and economic news this morning, followed by China. Foreign news is next, with updates on the situation in Belarus. We close out today’s report with an update on the pandemic. And, being Thursday, we have a new Weekly Energy Update. Here are the details.
If working from home is now the future and perhaps remote learning is too, then the location of where you live is less important than the functionality of one’s quarters. Being in a tiny neighborhood or big city with exorbitant veterinarian costs doesn’t make sense when one can’t go outside much anyway. And thus, we are seeing a rising flight to the suburbs for lower per square foot costs of housing and backyards. Even proximity to shopping isn’t a feature now that home delivery is available.
Mortgage refinancing activity has been elevated in recent months as mortgage rates have declined. The primary guarantors of these mortgages, Fannie Mae (FNMA, 2.11) and Freddie Mac (FMCC, 2.09), are applying a new fee to newly refinanced mortgages of 50 bps. The fee is ostensibly to protect the firms from loan losses, although mortgage lenders are viewing it in less sanguine terms. The fee will tend to dampen refinancing activity, all else held equal.
One of the problems with using executive orders to legislate is that Congress controls funding. Thus, if the White House wants to fund something via executive orders, it has to find the funding from some other source. To fund the $300 per week additional boost to unemployment insurance, the government is using $44 billion from FEMA funding. Unfortunately, that funding may only last six weeks.
One of the key components in solar panels, polysilicon, is in short supply after a series of explosions at processing plants in China. Since the industrial mishaps in July, prices are up 50%. China supplies two-thirds of the world’s polysilicon and nine of the top 10 solar panel manufacturers are Chinese. This news highlights the problem of deglobalization. When the world is perceived to be at peace, extending and concentrating supply chains is rational. It looks less so in a fractured world.
The U.S. is considering a free trade arrangement with Taiwan and Beijing is furious. After the CPC took control of mainland China in 1945, the Nationalist Chinese moved to Taiwan and established the Republic of China. For years, both sides claimed to be the legitimate government of China. Interestingly enough, this led to a period of stasis; the threat to this tacit agreement was if Taiwan ever decided it was a country independent of China. The U.S. action would be similar to China making a free trade deal with California, independent of the federal government. Polls suggest that the majority of Taiwan residents view themselves as singularly Taiwanese. Taiwan independence would be a flashpoint for conflict.
In our WGR series on the elections, we noted that various foreign nations were poised to try to affect the outcome of our election. China was mentioned; we commented that its methods were probably not as sophisticated as Russia’s (which are world class, IOHO). However, that isn’t to say China’s methods are crude. Reports indicate that China has created a network of fake social media accounts to promulgate polished videos against President Trump. We expect more of this sort of activity as November approaches from a variety of nations.
Foreign news:
Despite an aggressive crackdown, protests continue in Belarus. Thousands have been arrested. Security forces have resorted to live ammunition against protestors. At this point, we don’t think Lukashenko will be forced from power. Unlike in Ukraine, Belarus doesn’t have a natural division. Ukraine has been divided between a Russia-sympathizing east and a Europe-sympathizing west. In Belarus, there is no obvious alternative to Lukashenko. He has greater control over the security apparatus. However, even if he survives this threat, it is unlikely the country will thrive. The election will likely spur the young and talented to emigrate, causing a brain drain. It is likely Lukashenko will be forced to improve ties with Russia as Western nations will be less inclined to deal with him. This means less flexibility in dealing with Putin. Thus, he will survive, but in a weakened state.
There are reports that Iran seized an oil tanker in the Persian Gulf. The vessel was held for five hours, then released. It is not clear why it was boarded or why it was allowed to leave. Oil markets ignored the news. The event is one in a series of provocative acts by both the U.S. and Iran over the past year. They have raised tensions but not enough to trigger a war.
COVID-19: The number of reported cases is 20,648,298 with 750,030 deaths and 12,849,485 recoveries. In the U.S., there are 5,197,749 confirmed cases with 166,038 deaths and 1,755,225 recoveries. For illustration purposes, the FT has created a nifty interactive chart that allows one to compare cases across nations using similar scaling metrics. The FT has also issued an economic tracker that looks across countries with high frequency data on various factors. The weekly Axios map shows a clear improvement in cases in the U.S.
We have been reporting a large backlog of testing results that has rendered testing useless. If the results of a test take more than 10 days, by that time, the patient has probably recovered. As a result of this backlog, we are seeing a drop in testing; the good news is that the backlog will likely ease, meaning those getting tested will get their results sooner.
Although testing and reporting protocols in the developing world are considered weaker than in the developed world, it does appear that the rate of change is slowing in the former. However, the caseloads seem to be plateauing at a high level, which will tend to dampen growth in the emerging world.
by Bill O’Grady, Thomas Wash, and Patrick Fearon-Hernandez, CFA | PDF
Here is an updated crude oil price chart. The oil market has stabilized at higher levels after April’s historic collapse.
(Source: Barchart.com)
Crude oil inventories fell more than anticipated, declining 4.5 mb compared to forecasts of a 3.7 mb decline. The SPR declined 2.2 mb as oil that was placed in the SPR for temporary storage is now being put back into the commercial system.
In the details, U.S. crude oil production fell 0.3 mbpd to 10.7 mbpd. Exports rose 0.3 mbpd, while imports fell 0.4 mbpd. Refining activity rose 1.4% but most of that was due to declining East Coast capacity.
Unaccounted-for crude oil is a balancing item in the weekly energy balance sheet. To make the data balance, this line item is a plug figure, but that doesn’t mean it doesn’t matter. This week’s number is +515 kbpd. Although the volatility of this number is elevated, the trend is slowly stabilizing.
(Sources: DOE, CIM)
The above chart shows the annual seasonal pattern for crude oil inventories. This week’s data showed another decline in crude oil stockpiles. We are approaching the end of the seasonal withdrawal period. Although the declines of the last few weeks are supportive, stockpiles remain well above seasonal norms and remain a bearish factor.
Based on our oil inventory/price model, fair value is $35.95; using the euro/price model, fair value is $63.51. The combined model, a broader analysis of the oil price, generates a fair value of $49.85. The wide divergence continues between the EUR and oil inventory models. As the trend in the dollar rolls over, it is bullish for crude oil. Any supportive news on reducing the inventory overhang could be very bullish for crude oil.
As we have noted recently, gasoline consumption has stalled. However, we are seeing some good news on the distillate front—demand is clearly recovering.
We have seen a surprising jump in natural gas prices.
(Source: Barchart.com)
As the chart shows, there was a huge rally in early August and prices have been consolidating since. The jump in prices occurred despite the persistent inventory overhang.
The rise in prices is probably due to expectations that falling crude oil output will reduce natural gas supplies. It is not unusual for oil drillers to discover natural gas (so-called “associated gas”), so when oil production is elevated, natural gas supplies increase almost as a byproduct.
Some of the suddenness of the price action was likely due to rising coastal temperatures, but the sustainability will really come down to winter weather. Current outlooks are bearish for prices.
The mixed-to-higher tenor of risk assets so far today is understandable given the mixed news on the coronavirus. U.S. infections continue to moderate, but there has been little discernible progress on a new pandemic relief bill. Separately, Joe Biden announced yesterday that Senator Kamala Harris of California will be his running mate. We provide a brief comment on that choice below.
Moderna, Inc. (MRNA, 68.97) said it has reached an agreement to provide the U.S. government 100 million doses of its experimental coronavirus vaccine in exchange for more than $1.5 billion, with an option to provide an additional 400 million doses. With the Moderna deal, the U.S. has now agreed to spend more than $9 billion for shots from a number of different drug firms. It has also invested in vaccine research and development, as well as supplies like vials and syringes. The deals aim to accelerate the rollout of any vaccines that ultimately get approved, so they could help hasten an improvement in the crisis.
Skepticism continues to roll in regarding the coronavirus vaccine approved by Russian regulators, which we discussed in yesterday’s report. For example, German Health Minister Jens Spahn said in an interview with Deutschlandfunk radio that for people to be able to trust such a vaccine, it’s important to do extensive tests and make them public before the product is licensed, but that hasn’t been done in the Russian case.
According to Spahn, “It can be dangerous to start vaccinating millions, if not billions of people, too early, because that would likely kill off the [public] acceptance of vaccination if it goes wrong…And so, I’m very skeptical about what’s happening in Russia.”
Spahn’s concerns echo other statements that scientists have made regarding a risk that many people won’t trust the new vaccines enough to get their shots.
Officials are looking into the sudden emergence of the disease in four Auckland family members. One of the four worked at a cold storage facility that is now being tested for traces of the virus.
In mid-June, after a new outbreak in Beijing was traced to a large seafood and vegetable market, authorities detected the virus on cutting boards used to prepare imported salmon. Chinese officials downplayed the risk of transmission through refrigerated food at the time, but the New Zealand experience could spawn new concerns (no pun intended). Of course, there is also some possibility that China could have planted the New Zealand infections as a way to revive concerns about a refrigerated food vector and deflect attention from China’s poor management of the virus when it first surfaced last year.
The Big 10 and Pac-12 Conferences have voted to postpone college football and other fall sports due to the pandemic. With two of the five most powerful leagues punting on fall and some winter sports, the rest of college football’s major conferences will now be under pressure to postpone their seasons as well, even if that deprives schools of a major source of revenue. The only consolation was that the leagues said they will keep open the possibility of playing the sports in the spring.
The analysis echoes our concern that sharp revenue declines could force state and local governments to slash spending so far that they would offset the fiscal stimulus provided by federal spending. We discussed this concern in detail in our Asset Allocation Weekly from August 7, 2020.
As a reminder, whether to provide significant financial assistance to state and local governments remains one of the sticking points as the White House and congressional Democrats continue wrangling over the next coronavirus relief bill.
The news shows that the industries taking the brunt of the pandemic aren’t limited to just travel, hospitality, and leisure. Some types of healthcare firms have also been severely impacted.
With operators facing financial challenges, many could have trouble paying their rent. Healthcare REITs that own senior living and nursing home properties could therefore also face weaker prospects in the near term.
United States-China: As if to confirm the Trump administration’s concern about data security breaches by Chinese video-sharing app TikTok, an investigation by the Wall Street Journal found the app skirted a privacy safeguard in the Android operating system in order to collect unique identifiers from millions of mobile devices. The data allows the app to track users online without allowing them to opt out. The news will play into the hands of the administration’s China hawks, who have been working to cement a tough-on-China policy no matter who wins the November election (see this week’s WGR, which describes that effort in detail).
China: Faced with growing pushback from the U.S. and other Western democracies, President Xi has delivered a series of speeches rolling out a new macroeconomic strategy focused on domestic demand. The evolving strategy prioritizes domestic consumption, markets, and companies as China’s main growth drivers. Investments and technologies from overseas, though still desirable, would play more of a supporting role.
Beijing is on alert for flooding as China struggles with a series of severe weather events that are driving up food prices and threatening its economic recovery from the coronavirus.
Risk assets today are being buoyed by a continued moderation in U.S. coronavirus infections and hopes that the White House and congressional Democrats will return to the bargaining table to hash out a new pandemic relief bill. President Trump has also floated the idea of a capital gains tax cut. Finally, there is news that a Russian COVID-19 vaccine has received regulatory approval in Moscow, though many worry the shot has been rushed through the review process without full consideration of its safety and effectiveness. We review all the key news below.
In the U.S., new confirmed infections totaled less than 50,000 for the second straight day, and the seven-day moving average of new cases dropped to its lowest level since early July. Some of the decline in new cases probably reflects a drop in testing this month, but it still appears that the latest wave of infections is passing. The seven-day moving average of deaths has pulled back to about 1,100 per day. The figures paint a moderately positive picture of the current virology in the U.S., but investors will still be looking for a continued drop in infections, progress on vaccines and treatments, and new monetary and fiscal relief measures to tide over the economy in the short term (see below).
The move, the first time a COVID-19 vaccine has been approved for civilian use, comes after just two months of human trials and underscores Moscow’s desire to rush the vaccine through testing and trial procedures at breakneck speed in an attempt to beat Western pharmaceutical companies.
Even if the vaccine begins to be administered as soon as this month, the government plans to continue trials of the shot in parallel.
With the pandemic appearing to remain largely under control in China, the government of Macau eased quarantine requirements for visitors from the mainland. Authorities also said Macau would soon start issuing visas again. At first, visas would only be available for people from the neighboring Chinese province of Zhuhai, but the news nevertheless helped spark a global buying spree in travel and leisure stocks.
According to administration officials, states are merely encouraged to chip in enough funds to pay a supplemental unemployment of $400 per week. States that can’t come up with their own funds can rely on the federal disaster funds to pay $300 per week.
Either way, the supplemental benefit would be far lower than the $600 per week that was paid through the end of July. Even if the new program is put into place, the new funds would also probably not reach people for at least a couple of weeks. That alone will likely leave millions of people unable to pay their mortgage, rent, or other bills. It’s also important to remember that while the $600 per week was more than many workers’ pre-coronavirus wage, it may not have been much higher than their combined wage plus benefits. The new, reduced benefit and the multi-week delay in getting it to people could well produce a sharp contraction in demand that would hurt many businesses. Reports have already popped up regarding “eviction cairns,” or evicted tenants’ belongings piled up in the streets. Any delay in coming up with a fuller new relief package is a significant risk to the economy and is therefore potentially bearish for stocks.
The move doesn’t change how much tax employees and employers actually owe. Only Congress can do that.
Employers’ biggest worry is that if they stop withholding taxes without any guarantee that Congress will actually forgive any deferred payments, they could find themselves on the hook. That is a particular risk in cases where employees change jobs and employers can’t withhold more taxes from later paychecks to catch up on missed payments.
United States: Political scientists are on the lookout for a “blue shift” in the days following the November election. Because of Democratic voters’ greater propensity to use mail-in and absentee balloting, those ballots often push Democratic candidates’ tallies higher as they are slowly counted following the close of polling places. As Democratic candidates see their tallies increase from the initial counts, some Republican candidates are likely to charge fraud.
United States-China-Hong Kong: The U.S. government has issued a rule that Hong Kong exports to the U.S. must be labelled “Made in China” starting September 25. The move, in accordance with the suspension of the Hong Kong Policy Act of 1992 and President Trump’s executive order on “Hong Kong Normalization,” will see Hong Kong companies subjected to the same trade war tariffs levied on mainland Chinese exporters, should they make products subject to these duties.
Belarus: As protests continue against President Lukashenko’s apparently fraudulent reelection, in which he purportedly received more than 80% of the vote, popular opposition leader Svetlana Tikhanovskaya has fled the country and is now in neighboring Lithuania. Prior to leaving Belarus, Tikhanovskaya rejected the official results of the presidential election but requested her supporters to accept them in order to avoid bloodshed.
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