IEA Proposes Massive Release of Emergency Oil Stockpiles
China Auto Sales Drop 15% as Subsidy End Deepens Holiday Slump
China’s vehicle deliveries fell 15% in February, as the phasing out of government subsidies worsened the usual Lunar New Year holiday slump.
Vehicle wholesales dropped to about 1.8 million units last month, data from the China Association of Automobile Manufacturers released Wednesday showed. Deliveries of electric cars and plug-in hybrids fell 14% to about 765,000 units, a further sign that demand for new-energy cars is cooling.
While domestic demand remains soft, exports surged 52% in February, the data showed. BYD Co. is making inroads into markets like South America and the UK, while Geely Automobile Holdings Ltd. entered 13 new markets last year, including Brazil and South Africa.
Foreign automakers also use factories in China as an export hub. Honda Motor Co. plans to start exporting its China-made models to its home market, the first time a Japanese automaker has done so. Volkswagen AG.’s Anhui operations won a concession from the European Union to export its Cupra Tavascan without paying a 21% tariff after agreeing to a minimum import price and quota.
Small Business Outlooks Remain Healthy Despite Dip in Optimism
Small business optimism fell for the second consecutive month in February as firms reevaluated their capex plans. Hiring plans also moved lower, a deterioration seemingly driven by weak worker demand as opposed to scarce worker supply. The share of firms referencing labor quality as their top problem slipped to 15% in February, marking the lowest share since April 2020. (…)
A readjustment in capital expenditures was the primary drag on small business optimism. After rising four points in January, the net share of firms making capital outlays fell back six points in February.
Small business hiring plans deteriorated in February, providing additional evidence that hiring is likely to remain muted over the near term. A net 12% of small firms intended to hire over the next three months, down from 16% in January and the lowest reading since May 2024. Job openings ticked up slightly to 33% but also remained historically weak.
In contrast to the decline in the headline optimism index, small firms’ sales broadly improved in February. The net share of firms reporting an increase in sales over the past three months moved into positive territory for the first time since May 2022.
Small business earnings also shot up in February. The net percent of firms reporting an uptick in post-tax income jumped seven points to -14%. Although still negative on net, this indicator is sitting at its highest point since December 2021.
Small business inflation appears stuck in a holding pattern. A net 24% of small firms raised prices and 28% planned to raise prices, remaining elevated over historic norms. While each declined slightly compared to January, these inflation indicators have essentially moved sideways over the past year.
There is no easy exit to Trump’s war The US and Israeli attacks on Iran will leave the Middle East in greater turmoil
The FT Editorial Board:
(…) Since launching the biggest conflict in the Middle East in decades after being spurred on by Israeli Prime Minister Benjamin Netanyahu, Trump has been boastful, belligerent and confusing in equal measure. The critical question of how the conflict ends is left unanswered. He has failed to articulate a clear set of goals or a day-after plan.
He has spoken about destroying the Islamic republic’s ballistic arsenal and nuclear programme, a Venezuela-style leadership change, and an “unconditional surrender”.
On Monday, he described the war, which involves the biggest US military deployment in the Middle East since the 2003 US-led invasion of Iraq, as a “little excursion”. At the weekend, he dismissed concerns about rising fuel prices as “a little glitch”.
His administration appears to have underestimated the repercussions of the conflict it unleashed and failed to understand its enemy. US and Israeli officials say Iran’s ability to launch missiles has been significantly debilitated. (…)
Yet if Trump expected the regime to capitulate under fire, he is being proven wrong on a daily basis. Cornered and battling for its life, the regime has been lashing out in all directions, fighting an asymmetrical war of attrition that it has long prepared for. (…)
Gulf leaders had pressed Trump not to strike Iran and warned of the risks of a regional conflict if he did. Now their nations are bearing the brunt. Yet Trump told Fox News on Monday he was surprised that Iran “attacked countries that were not attacking them”.
There are hints that he is indeed seeking an off-ramp. Yet the war he started has no good ending. There are no signs the regime is about to capitulate — it appointed Khamenei’s son, Mojtaba, as successor to his father in an act of defiance. Nor are there indications that it is facing imminent collapse. (…)
Any chances of a transition to a more moderate, less hostile government appear remote. If the regime were to disintegrate, the more likely outcome is a fragmented, fractured nation.
Iranians will suffer and its neighbours will have another failed state in their backyard. Continuing the war risks triggering a bigger energy crisis that would have consequences for the global economy and, most important for Trump, endanger Republicans ahead of the midterm elections.
Ending it will leave the regime wounded and weakened, yet able to claim its survival as a victory. Whichever path Trump now takes, it will be others who pay the price of his Iran folly.
- Iranians rethink the price of regime change Destructive US and Israeli war and Islamic republic’s resilience have alarmed even those who supported foreign intervention
(…) “We weren’t supposed to be bombed,” Mandana said, her voice trembling after a massive explosion near her apartment by Vanak Square in central Tehran. “Our city, our country, this wasn’t supposed to happen. How is it that Venezuela . . . saw clean, bloodless regime change, but not here?”
The scale of destruction and the apparent resilience of the Islamic regime, which appointed Khamenei’s son Mojtaba as the new supreme leader in an act of defiance, has prompted many Iranians to rethink hopes that foreign intervention might bring about its end.
Approaching two weeks into the war, no signs exist of the sort of anti-regime unrest that broke out across the country in January before being crushed in a brutal crackdown that killed thousands.
Instead many, even those who loathe the Islamic republic, appear to have recoiled at the destruction and comments including Donald Trump’s threat to target electricity production facilities if the regime escalated. The US president also said Iran’s map will “probably not” be the same after the war, sparking fears the conflict could break apart the country.
One sociologist in Tehran, who is critical of the regime and the war, said there was anecdotal evidence of a growing “sense of nationalism emerging from the war” as happened during Israel’s 12-day conflict against Iran last year, when people rallied around the flag.
“The fear of Iran’s destruction is increasingly uniting people as they fear the consequences of such a large-scale conflict,” the sociologist said, asking not to be named.
Non-military sites have become collateral damage, as air strikes target police stations, military facilities and officials living in residential neighbourhoods. More than 1,000 civilians have been killed and over 8,000 homes damaged or destroyed, according to official figures.
The scenes of devastation — to schools, a desalination plant, passenger aircraft and historic landmarks such as Tehran’s Grand Bazaar and Golestan Palace — have shocked many Iranians.
“If they wanted to assassinate the supreme leader, why are they waging full-scale war?” asked one woman. Before the war, she — like many anti-regime Iranians inside and outside the country — had welcomed military intervention. (…)
FYI:
Iran’s Islamic Revolutionary Guard Corps, the paramilitary force that answers directly to the supreme leader, seems to have pushed Mojtaba’s selection through. Starting on March 3, Guard commanders pressured Assembly members through what Iran International describes as “repeated contacts and psychological pressure.”
The online vote took place under what participants called an “unnatural” atmosphere—opponents given limited time to speak, debate cut off. U.S. and Israeli bombs struck the Assembly’s office in Qom after members voted but before counting finished. U.S. President Donald Trump had called Mojtaba “unacceptable,” insisting he, Trump, “must be involved in the appointment.” Israel’s military warned it would target any successor.
The elder Khamenei apparently didn’t want this either. According to sources within the Assembly cited by the London-based Persian-language news outlet Iran International, he “was not pleased with the idea of his son’s leadership and never allowed this issue to be raised during his lifetime.” (Note: Iran International is Saudi-funded.)
The Washington Post reports Khamenei said as much in his will. Iran’s founding ideology rejects hereditary succession—the 1979 revolution toppled a dynasty. And yet the Guards installed the dead leader’s son, a mid-ranking cleric most Iranians have never heard speak, who lost his father, mother, wife, and a child in the same strike. One analyst told Time: “He is filled with an undying desire for revenge, and the Guards know this.” (The Signal)
A Compromised Fed Would Risk a Fiscal Crisis
By Bill Dudley, former president of the Federal Reserve Bank of New York:
(…) the CBO projects debt service will reach 4.6% of GDP in 2036, up from 3.3% in 2026. Large budget deficits are increasing the amount of federal debt and the interest expense needed to service the shortfall. In addition, the average interest rate on the debt continues to rise as the low-cost debt issued between 2009 and 2022 matures and is refinanced at higher interest rates.
The debt service problem is one reason why the Trump administration is so intent on seizing control of the Federal Reserve and cutting short-term interest rates. Lower rates help the fiscal outlook in three ways: lower debt service costs, faster economic growth that generates more tax revenue, and faster inflation that reduces the real debt burden.
Over the next decade, the CBO expects there will be a 2 percentage-point gap between the annual budget deficit (6%) and nominal GDP growth (4%). As a consequence, the federal debt-to-GDP ratio will rise by about 2% each year. But if growth and inflation were each a percentage higher, then nominal GDP growth would be 6%.
(…) if the inflation rate rose and the Fed’s independence were compromised, inflation expectations would increase, pushing up yields on longer-dated Treasury securities as well as the government’s debt service costs.
As the economist Herb Stein famously observed, “If something cannot go on forever, it will stop.” Markets are ignoring the nation’s increasingly unsustainable fiscal path and the absence of the political will to tackle it.
If the Fed’s independence is compromised, that could be the trigger that brings the bond market vigilantes back and, with them, the market turbulence that forces the administration and Congress to change course.