Menagerie, Jan. 16-17
More North Korea missile tests; Weaker Q4 GDP print prompts China rate cuts; The Joker Outsted
Skipping the diatribes for today. Thanks for reading, as usual.
A. The Lead
North Korea test-launched two suspected ballistic missiles Monday in its fourth rocket volley this year, turning up regional tensions with its biggest string of tests since August 2019.
South Korea’s military said North Korea fired what appeared to be two ballistic missiles toward waters off its east coast. Defense Minister Nobuo Kishi told reporters in Tokyo that North Korea appeared to have fired two suspected ballistic missile eastward that splashed down in waters outside of Japan’s exclusive economic zone. Further details were not immediately available and North Korea typically doesn’t comment on its launches until a day after the fact.
The tests come after North Korean leader Kim Jong Un told a top-level meeting of his ruling party at the end of 2021 that he was more interested in bolstering his arsenal than returning to nuclear disarmament talks with the U.S., which have been stalled for nearly three years. …
This month, his state has had two separate launches of a hypersonic missile systems designed to use high speeds and maneuverability to evade U.S-operated interceptors. Pyongyang said it fired two tactical guided missiles from rail carriages Friday.
Before that launch, North Korea warned it would take a “stronger and certain reaction” after the U.S. sanctioned individuals associated with Pyongyang’s weapons program, saying tests this month of its hypersonic missile system were part of its “legitimate right” to enhance its self-defense.
North Korea last conducted a larger series of tests when it was rolling out new solid-fuel, short-range ballistic missiles designed to modernize its arsenal and deliver nuclear warheads to U.S. military bases in all of South Korea.
Kim’s regime has also found ways to evade sanctions, with the U.S. and United Nations Security Council accusing it of stepping up its cybercrimes to fill its depleted coffers. …
In what might be a sign of opening, North Korea appears to have sent a freight train across its border to China over the weekend, which could be returning later Monday with cargo, NK News reported, citing an informed source. Yonhap News Agency reported the train has crossed back into North Korea, citing unnamed sources.
China’s economic growth weakened last quarter in the face ofslow private spending, a property market crisis and virus outbreaks, giving the central bank cause to cut its key interest rate for the first time in almost two years.
Gross domestic product grew 4% in the final quarter of 2021 from a year earlier, the National Bureau of Statistics said Monday, higher than the 3.3% rise projected by economists but slower than in previous three months. For the full year, the world’s second-largest economy expanded 8.1%, well above the government’s target of “over 6%.”
The economy was battered by repeated shocks in the latter half of last year: electricity shortages, defaults from a slow-moving housing and property crisis hitting confidence and investment, and repeated Covid-19 outbreaks, which damaged travel and private consumption. The slowdown prompted officials to try and front-load spending this year to boost investment and activity, with the central bank cutting policy interest rates for the first time since early 2020 to support growth. …
The outlook for 2022 is still unclear, with global demand forecast to slow, the omicron variant still spreading inside and outside the country, and no end to the housing market crisis that began with China Evergrande Group but has since snowballed. Beijing has made economic “stability” a priority this year ahead of a meeting in the fall where President Xi Jinping is expected to be confirmed as leader again, suggesting the government will take more stimulus steps to spur growth.
The People’s Bank of China exceeded market expectations for stimulus by cutting two key policy interest rates ahead of the GDP release. It cut the one-year medium-term lending facility rate to 2.85% from 2.95% and lowered the seven-day reverse repurchase rate to 2.1% from 2.2%. It also injected more liquidity by offering 700 billion yuan ($110 billion) of MLF loans, exceeding the 500 billion yuan maturing, and added 100 billion yuan with seven-day reverse repos, more than the 10 billion due.
Industrial output rose 4.3% in December from a year earlier, versus the median forecast of 3.7%. For the full year, it went up 9.6%. Output is likely to be weak this month due to the upcoming Lunar New Year break, disruptions from stringent virus containment measures in Xi’an, Tianjin, some cities in Zhejiang and elsewhere, as well as production curbs imposed on heavy industries in northern China to ensure blue skies for Beijing’s Winter Olympics.
Retail sales growth slowed to 1.7% in December from 3.9% in November and versus an estimate of 3.8%. Total sales rose 12.5% in the year. While catering revenue and off-line retail sales stayed under pressure from the pandemic, holiday shopping toward the year-end and an early Spring Festival likely provided some support. …
Novak Djokovic’s anti-vaccination stance has cost him a potential payday of A$2.875 million ($2.1 million) and a shot at tennis history after the player lost his battle to remain in Australia and was deported.
The Serbian boarded a flight from Melbourne Airport late Sunday night after the nation’s Federal Court upheld a decision to revoke his entry permit over fears his presence would strengthen anti-vaccination sentiment. It wasn’t up to the court to decide on the merits of the decision, only whether it was illogical or legally unreasonable, Chief Justice James Allsop said Sunday.
“I respect the Court’s ruling and I will cooperate with the relevant authorities in relation to my departure from the country,” Djokovic said in a statement. “I will now be taking some time to rest and to recuperate.” …
Djokovic is paying a high price for seeking to bypass an entry requirement in one of the world’s most vaccinated countries. Host-city Melbourne endured strict lockdowns during the pandemic, and the tennis star has faced public outrage since arriving with a medical exemption on Jan. 5. At the same time, Morrison is trying to show his strength in handling the Covid-19 pandemic and border rules ahead of a general election that must be called by May.
The Association of Tennis Professionals said in a statement that Djokovic was one of the sport’s greatest champions and that his absence from the Australian Open was “a loss for the game”.
“We know how turbulent the recent days have been for Novak and how much he wanted to defend his title in Melbourne. We wish him well and look forward to seeing him back on court soon,” the organization said. “ATP continues to strongly recommend vaccination to all players.” …
Serbia’s president suggested the outcome was an attack not just on the player, but on his home country as well.
“They mistreated him for 10 days only to hand him a verdict that they had in mind from the very first day,” Aleksandar Vucic told reporters in Belgrade after a phone call with the tennis star, the state news agency Tanjug reported. …
“Australian Open is much more important than any player,” world no. 6 Rafael Nadal told reporters Saturday. “Novak Djokovic is one of the best players of the history, without a doubt, but there is no one player in history that’s more important than an event.”
Patrick Mouratolglou, the coach of Serena Williams, tweeted that “we will hopefully start talking about tennis.” Play begins Monday.
Djokovic’s next chance at a 21st Grand Slam will be at the French Open, which starts in May.
B. Money Talks
Unilever Plc has held talks with banks about additional financing for a potential sweetened offer for GlaxoSmithKline Plc’s consumer products division, according to people familiar with the matter.
Some financial firms have discussed lending enough for a bid higher than 50 billion pounds ($68 billion) -- the latest of three offers Glaxo has rejected for a bundle of brands including Advil painkiller and Sensodyne toothpaste.
Unilever hasn’t made a final decision on using the firepower, said the people, who requested anonymity as they aren’t allowed to speak publicly. The owner of Ben & Jerry’s ice cream and Dove soap could eventually sell some non-core assets from the Glaxo portfolio to buyers including private equity firms, which could help fund an acquisition, the people said.
Glaxo over the weekend said it had rejected Unilever’s offers as too low after the U.K. consumer-products company confirmed its approach. The drugmaker said it’s sticking with plans to spin off the portfolio of brands. …
Glaxo’s board is open to proposals but the latest bid late last year was not within a range the company would consider, the people said. The pharma giant talked up growth prospects for the unit, formed through a combination of its consumer labels with those of Pfizer Inc., which retains a minority stake.
A takeover would be one of the largest globally in the past twelve months, and would come at a time when merger and acquisition activity is at an all-time high. It would also be Unilever’s biggest-ever deal, advancing Chief Executive Officer Alan Jope’s ambition to execute bigger and bolder acquisitions to reshape the company’s roster of labels. …
Glaxo is also under pressure from shareholders, including activist fund Elliott Investment Management LP, which has urged the drugmaker to consider a sale rather than a spinoff of the consumer brands. The pharma company has trailed rivals such as AstraZeneca Plc in developing new treatments.
Glaxo has said it expects sales at the business to increase by 4% to 6% in the medium term, which is faster than the growth rate at Unilever’s personal care division. …
Consumers and businesses are increasingly starting to use digital tokens other than Bitcoin for purchases, according to BitPay Inc., one of the biggest crypto payments processors in the world.
Last year, Bitcoin’s use at merchants that use BitPay dropped to about 65% of processed payments, down from 92% in 2020, the company told Bloomberg. Ether purchases accounted for 15% of the total, stablecoins were 13% and new coins added to BitPay in 2021 -- Dogecoin, Shiba Inu and Litecoin -- accounted for 3%.
The alternative coins’ use surged partly as more businesses have begun using stablecoins for cross-border payments. Consumers also tend to move to stablecoins -- whose value is supposed to stay steady -- when crypto prices drop, and they’ve been falling since early November. Coins like Doge also made a splash last year, thanks to fans like Tesla Inc. Chief Executive Elon Musk, who on Friday said the token can be used to buy the company’s merchandise.
With Bitcoin’s price rising 60% last year, despite the fourth-quarter volatility, many investors may also have chosen to hold onto the world’s biggest cryptocurrency instead of spending it. Many remember Bitcoin’s first commercial transaction, in which a programmer spent Bitcoins now worth billions on two pizza pies.
When they did spend their crypto, many bought luxury good like jewelry and watches, cars, boats -- and even (cover your ears) gold, which Bitcoin -- touted as digital gold -- is supposed to replace, according to BitPay. The Atlanta-based private company’s transaction volumes related to luxury goods surged 31% last year from 9% in 2020, said Chief Executive Officer Stephen Pair. The company’s overall 2021 payment volumes rose 57% year over year. …
More merchants are accepting crypto payments now. Last year BitPay began working with VeriFone to accept digital coins at its terminals at various stores.
For its part, BitPay is showing signs of confidence as well. It just appointed Jim Lester its first-ever chief operating officer to expand the business. Lester previously headed startup ThingTech, and was also senior vice president of product management, strategy and marketing at Fiserv Inc.’s electronic billing and payments division.
A growing list of companies including PayPal Holdings Inc. are stepping into crypto payments as well, showing the payments market’s growth potential. …
C. Crunch Time
Boris Johnson faces another bruising week, with his future as U.K. prime minister in the balance amid a furious public backlash over rule-breaking parties at his Downing Street office.
Six lawmakers in the governing Conservative Party have already called on Johnson to resign over allegations of alcohol-fueled get-togethers involving Downing Street staff when the country was in lockdown.
Many Conservative members of Parliament report receiving hundreds of emails from local activists and voters angered by the alleged events, which include ones held in April 2021, the evening before Queen Elizabeth II sat alone at the funeral of her husband Prince Philip.
Amid warnings that Johnson has one last chance to save his leadership, Conservative Chair Oliver Dowden said the “contrite” prime minister is committed to tackling the “underlying culture” at Downing Street. British media reported that Johnson is planning a clearout of staff and a series of populist policy announcements, including tackling the backlog of National Health Service operations and removing remaining Covid-19 restrictions on Jan. 26.
Critical to his future will be the verdict of senior civil servant Sue Gray, who has been charged with investigating the various events held in Downing Street and around Whitehall during the pandemic. Many Tories say they will only make up their minds once Gray has published her findings, which could be as early as this week.
The “partygate” scandal has plunged Johnson into the deepest crisis of his premiership, with opinion polls showing his personal approval ratings collapsing and the Conservatives around 10 percentage points behind the opposition Labour Party. Crucially, he is losing support in the traditionally Labour-voting districts in northern England that flipped at the 2019 general election.
The latest demand for Johnson to go came from former minister Tim Loughton, who said he had “regretfully” come to the conclusion that his position is now ‘untenable.” Fellow Tory member of Parliament Andrew Bridgen said Johnson had lost the moral authority to lead.
However, others came out in support of Johnson. In broadcast appearances Sunday, Dowden acknowledged the depth of public anger, but said Johnson had made the “right call” on vaccines. Conservative MP James Wild said he was not calling for Johnson to quit “at this stage.” …
Over the weekend, Labour leader Keir Starmer repeated his call for Johnson to quit, saying he believed the prime minister broke the law and lied.
“The prime minister has degraded the office of prime minister and he has lost all authority, not only in his own party but in the country,” Starmer told the BBC’s “Sunday Show.”
China’s home prices fell for a fourth consecutive month in December, as the credit crunch in the property sector showed little sign of easing.
New home prices in 70 cities, excluding state-subsidized housing, slid 0.28% last month from November, when they dropped 0.33%, National Bureau of Statistics figures showed Saturday.
A liquidity crisis at industry giant China Evergrande Group is spreading to competitors including Shimao Group Holdings Ltd. and Guangzhou R&F Properties Co. Falling prices may dissuade homebuyers concerned about the value of their assets, making it harder for developers to sell properties and generate much needed cash.
Recent moves by authorities to ease some of the restrictions on real estate funding have done little to boost the market. Home loan demand stayed weak in December, with households’ mid- and long-term loans, a proxy for mortgages, increasing the least since February 2020. Year-end sales campaigns by developers added to downward pressure on prices. …
A growing number of economists are predicting the People’s Bank of China will further loosen monetary policy in the first quarter, partly to counter the housing slump. The central bank fueled speculation it will ease sooner rather than later with its vow in December to take “proactive” action.
“Tightening on the real estate sector probably needs to be loosened more to lift growth this year to above 5%,” Huatai Securities Co. economists led by Yi Hen wrote in a report earlier this month. “Fund raising related to real estate hasn’t bounced back strongly enough yet.”
Credit Suisse Group AG’s Chairman Antonio Horta-Osorioresigned following scrutiny over reported quarantine breaches, an abrupt departure for a leader who had been tasked with guiding the Swiss banking giant past a series of scandals.
Zurich-based Credit Suisse named board member Axel P. Lehmann as his replacement following an investigation commissioned by the board, it said in a statement.
Last month, the bank said it “regretfully acknowledged” that Horta-Osorio breached quarantine rules by leaving Switzerland before his period of isolation was over. Later, Reuters reported that the Portuguese banker attended the Wimbledon tennis finals in London in early July, a period when arrivals from Europe were obliged to undergo a period of quarantine.
“I regret that a number of my personal actions have led to difficulties for the bank and compromised my ability to represent the bank internally and externally,” Horta-Osorio said in the statement. “I therefore believe that my resignation is in the interest of the bank and its stakeholders at this crucial time.” …
“We have set the right course with the new strategy and will continue to embed a stronger risk culture across the firm,” Lehmann said in the statement.
D. Calamity in Tonga
Wellington, New Zealand (AP) -- The tsunami threat around the Pacific from a huge undersea volcanic eruption began to recede Sunday, while the extent of damage to Tonga remained unclear.
Satellite images showed the spectacular eruption that took place Saturday evening, with a plume of ash, steam and gas rising like a mushroom above the blue Pacific waters. A sonic boom could be heard as far away as Alaska.
In Tonga it sent tsunami waves crashing across the shore and people rushing to higher ground.
The eruption cut the internet to Tonga, leaving friends and family members around the world anxiously trying to get in touch to figure out if there were any injuries and the extent of the damage. Even government websites and other official sources remained without updates on Sunday afternoon.
New Zealand Prime Minister Jacinda Ardern said there had not yet been any official reports of injuries or deaths in Tonga, but cautioned that authorities hadn't yet made contact with some coastal areas and smaller islands.
“Communication with Tonga remains very limited. And I know that is causing a huge amount of anxiety for the Tongan community here,” Ardern said.
She said there had been significant damage to boats and shops along the Tongan coastline. The capital, Nuku'alofa, was covered in a thick film of volcanic dust, Ardern said, contaminating water supplies and making fresh water a vital need.
Aid agencies said thick ash and smoke had prompted authorities to ask people to wear masks and drink bottled water.
Ardern said New Zealand was unable to send a military surveillance flight over Tonga on Sunday because the ash cloud was 63,000 feet (19,000 meters) high but they hoped to send the flight on Monday, followed by supply planes and navy ships.
One complicating factor to any international aid effort is that Tonga has so far managed to avoid any outbreaks of COVID-19. Ardern said New Zealand's military staff were all fully vaccinated and willing to follow any protocols established by Tonga.
Dave Snider, the tsunami warning coordinator for the National Tsunami Warning Center in Palmer, Alaska, said it was very unusual for a volcanic eruption to affect an entire ocean basin, and the spectacle was both “humbling and scary.”
The tsunami waves caused damage to boats as far away as New Zealand and Santa Cruz, California, but did not appear to cause any widespread damage. Snider said he anticipated the tsunami situation in the U.S. and elsewhere to continue improving.
Tsunami advisories were earlier issued for Japan, Hawaii, Alaska and the U.S. Pacific coast. The U.S. Geological Survey estimated the eruption caused the equivalent of a magnitude 5.8 earthquake. Scientists said tsunamis generated by volcanoes rather than earthquakes are relatively rare.
The Tonga Meteorological Services said a tsunami warning was declared for all of the archipelago, and data from the Pacific tsunami center said waves of 80 centimeters (2.7 feet) were detected.
Rachel Afeaki-Taumoepeau, who chairs the New Zealand Tonga Business Council, said she hoped the relatively low level of the tsunami waves would have allowed most people to get to safety, although she worried about those living on islands closest to the volcano. She said she hadn’t yet been able to contact her friends and family in Tonga.
“We are praying that the damage is just to infrastructure and people were able to get to higher land,” she said.
U.S. Secretary of State Antony Blinken wrote on Twitter he is “deeply concerned for the people of Tonga as they recover from the aftermath of a volcanic eruption and tsunami. The United States stands prepared to provide support to our Pacific neighbors.”
Tonga gets its internet via an undersea cable from Suva, Fiji. All internet connectivity with Tonga was lost at about 6:40 p.m. local time, said Doug Madory, director of internet analysis for the network intelligence firm Kentik.
On Tonga, which is home to about 105,000 people, video posted to social media showed large waves washing ashore in coastal areas and swirling around homes, a church and other buildings. A Twitter user identified as Dr. Faka’iloatonga Taumoefolau posted video showing waves crashing ashore.
“Can literally hear the volcano eruption, sounds pretty violent,” he wrote, adding in a later post: “Raining ash and tiny pebbles, darkness blanketing the sky.”
The explosion of the Hunga Tonga Hunga Ha’apai volcano was the latest in a series of dramatic eruptions.
Earth imaging company Planet Labs PBC had watched the island in recent days after a new volcanic vent there began erupting in late December.
Satellite images captured by the company show how drastically the volcano had shaped the area, creating a growing island off Tonga.
“The surface area of the island appears to have expanded by nearly 45% due to ashfall,” Planet Labs said days before the latest activity.
Following Saturday’s eruption, residents in Hawaii, Alaska and along the U.S. Pacific coast were advised to move away from the coastline to higher ground and to pay attention to instructions from their local emergency management officials, said Snider.
“We don’t issue an advisory for this length of coastline as we’ve done — I’m not sure when the last time was — but it really isn’t an everyday experience,” Snider said.
Savannah Peterson watched in shock as the water rose several feet in a matter of minutes in front of her oceanfront house in Pacifica, California, just south of San Francisco.
“It came up so fast, and a few minutes after that it was down again. It was nuts to see that happen so quickly,” she said. “I’ve never had water come all the way up to my front door, and today it did.”
Police rescued a surfer whose surfboard broke in powerful waves off San Francisco.
Farther south in Santa Cruz, California, officials were taking stock of damage after a surge damaged boats and inundated low-lying streets and parking lots, sending cars afloat.
In Southern California, surging waters sunk at least one boat in Ventura Harbor northwest of Los Angeles.
New Zealand’s private forecaster, Weather Watch, tweeted that people as far away as Southland, the country’s southernmost region, reported hearing sonic booms from the eruption. Others reported that many boats were damaged by a tsunami that hit a marina in Whangarei, in the Northland region.
Earlier, the Matangi Tonga news site reported that scientists observed massive explosions, thunder and lightning near the volcano after it started erupting early Friday. Satellite images showed a 5-kilometer (3-mile) -wide plume rising into the air to about 20 kilometers (12 miles).
The Hunga Tonga Hunga Ha’apai volcano is located about 64 kilometers (40 miles) north of Nuku’alofa. In late 2014 and early 2015, a series of eruptions in the area created a small new island and disrupted international air travel to the Pacific archipelago for several days.
There is not a significant difference between volcanoes underwater and on land, and underwater volcanoes become bigger as they erupt, at some point usually breaching the surface, said Hans Schwaiger, a research geophysicist with the Alaska Volcano Observatory.
With underwater volcanoes, however, the water can add to the explosivity of the eruption as it hits the lava, Schwaiger added.
Before an explosion, there is generally an increase in small local earthquakes at the volcano, but depending on how far it is from land, that may not be felt by residents along the shoreline, Schwaiger said.
In 2019, Tonga lost internet access for nearly two weeks when a fiber-optic cable was severed. The director of the local cable company said at the time that a large ship may have cut the cable by dragging an anchor. Until limited satellite access was restored people couldn’t even make international calls.
Southern Cross Cable Network’s Veverka said limited satellite connections exist between Tonga and other parts of the world but he did not know if they might be affected by power outages.