Yale’s Stephen Roach: Markets are in danger of being ‘whipsawed’ by Middle East conflict, U.S. unemployment
01 October 2024, Israel, Tel Aviv: Missiles launched from Iran are seen in the sky over Tel Aviv.
Ilia Yefimovich/dpa | Picture Alliance | Getty Images
Markets are in danger of being “whipsawed” by the combination of regional conflict in the Middle East and rising unemployment in the United States, says Stephen Roach, senior fellow at Yale Law School’s Paul Tsai China Center.
The conflict in the Middle East escalated on Tuesday, with Iran launching a ballistic missile attack on Israel after its killing of Hezbollah leader Hassan Nasrallah and an Iranian commander in Lebanon.
Most Asian markets fell on Wednesday, tracking losses on Wall Street overnight, as investors fretted over rising tensions in the Middle East.
“The markets really will not know where to turn,” Roach said, adding that conflicts in the Middle East are adding to inflationary risks at a time when global central banks are starting to ease monetary policy.
“We are likely to see significant increases in volatility and markets that really are whipped back and forth dramatically,” Roach told CNBC’s “Squawk Box Asia” on Wednesday.
Oil market impact
The Israel Defense Forces said its troops had started launching new strikes against Hezbollah targets in Lebanon in response to Iran’s missile attack Tuesday night.
It remains to be seen whether there will be lasting effects on inflation, said Stephen Stanley, chief economist at Santander, adding that the oil market will be “affected more significantly” if the tension escalates.
Iran is the third-largest producer among the Organization of the Petroleum Exporting Countries, pumping out nearly four million barrels of oil per day, according to the Energy Information Administration. Oil prices had jumped over 5% after the missile strike before tapering to a 2% climb.
Outlook for interest rates
The Israeli response to Iran’s attacks “might throw the Fed’s 25-basis-point rate cut off track,” said Kelvin Tay, regional chief investment officer at UBS Global Wealth Management.
The U.S. Federal Reserve projected cutting interest rates by another half point over the next two policy meetings this year, according to the central bank’s so-called dot plot from the September meeting.
Traders are also looking to U.S. payroll data on Friday for more indications on the state of the economy after the U.S. Federal Reserve’s jumbo rate cut in September. A higher-than-expected unemployment rate could prompt the Fed to accelerate the easing cycle to achieve a soft landing.
The unemployment rate in September is expected to come in at 4.2%, according to data of a Reuters poll on LSEG, unchanged from the August figure. The unemployment rate had jumped to near a three-year high of 4.3% in July, a dramatic rise from the five-decade low of 3.4% in April 2023.
Another factor that could affect the Fed’s rate-cutting pace is how long dockworkers’ strikes at the U.S. East and Gulf coasts will last, Tay said.
Dockworkers at ports stretching from Maine to Texas have gone on a large-scale strike over disputes on wages and threats from automation. It’s expected to disrupt global supply chains and has halted the flow of nearly half of the country’s ocean shipping, Reuters reported.
“Any disruption of the port, any work stoppage at the port is going to have a very significant economic consequence and very quickly,” said Peter Tirschwell of S&P Global Market Intelligence, warning that “the longer this goes on, the quicker the economic damage will mount.”
SolarEdge and Solar Landscape are going to turn hundreds of empty commercial rooftops into solar energy generators in the US.
The two companies announced today that they’ve struck a deal to use SolarEdge’s US-made solar technology in more than 500 commercial rooftop projects across multiple states. Construction will take place in 2025 and 2026.
The installations will be built on large-scale commercial and industrial buildings – think warehouses and distribution centers – with a ton of untapped solar potential.
“Generating electricity on commercial rooftops and distributing it into the grid is America’s most shovel-ready energy option,” said Shaun Keegan, CEO of commercial rooftop solar developer Solar Landscape. “Our partnership with SolarEdge allows us to rapidly and efficiently deploy solar across a diverse array of commercial and industrial rooftops. Their US-manufactured technology gives us the reliability and performance we need while meeting domestic content requirements for our projects.”
Using US-made tech helps projects qualify for federal incentives while reducing delays by keeping supply chains local. SolarEdge says its domestic manufacturing operations have already created about 2,000 American jobs.
Naama Ohana, who heads up SolarEdge’s commercial & industrial division, said, “This collaboration demonstrates how American innovation and manufacturing are helping to address the nation’s growing energy needs while strengthening local economies.”
In 2024 alone, Solar Landscape leased 40 million square feet of rooftop space in the US, and it aims to deploy enough solar to power around 80,000 homes. The company now has more than 80 partners who own over 2 billion square feet of commercial property nationwide.
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Hyundai is preparing to launch what’s expected to be its most advanced EV yet. With its official launch just around the corner, Hyundai’s new Elexio SUV is already beating expectations in global testing.
Hyundai’s Elexio electric SUV impresses in global tests
We got our first look at the Elexio in May after Hyundai’s joint venture with BAIC, Beijing Hyundai unveiled the new electric SUV in Shanghai.
After warning that China is a “must-fight place” for global automakers, including itself, Hyundai is stepping up to the plate.
The Elexio is “a new starting point,” the company claims. Dubbed the IONIQ 5 of China, Hyundai’s new electric SUV is packed with smart technology, fast charging capabilities, and advanced features, boasting a CLTC driving range of 435 miles (700 km).
Ahead of its official launch in China in the next few weeks, the Elexio is already making a statement during global tests.
Hyundai’s new electric SUV has now undergone three crash tests, among other global evaluations, consistently outperforming safety, quality, and performance expectations each time.
After impressing during front, side, and ditch rollover safety tests, Hyundai credited the five layers of ultra-high-strength steel plating, dubbed “God’s Hand,” around the frame. In fact, it has a 360-degree reinforced body design with eight horizontal and seven vertical floor beams.
In a -30℃ (-22F) chamber, the Elexio still started up and charged while the battery preconditioned. It also lost less driving range than the average. The Elexio lost 39% of its range compared to an average of around 40% at -7℃ (19.4°F).
The final global ride and handling road test proved Hyundai’s electric SUV is ready to hit the streets. Hyundai simulated 17 types of “bad urban road” conditions to see if the Elexio could handle them.
Based on Hyundai’s E-GMP platform, the company claims the Elexio offers “the highest suspension configuration in its class.” Added high-end shock absorber valves and hydraulic bushings to minimize vibration, while providing drivers with more control over the vehicle. Hyundai fine-tuned the suspension over 300 times for the perfect ride.
After China’s MIIT released sales info last month, we learned that Hyundai’s new electric SUV is 4,615 mm in length, 1,875 mm in width, and 1,673 mm in height, which is slightly smaller than the Tesla Model Y.
It will be available in single and dual-motor powertrain options, providing 160 kW (214 hp) and 233 kW (312 hp) of output, respectively. The LFP batteries will be supplied by BYD’s battery unit, FinDream.
Hyundai is set to launch the Elexio in China in the third quarter of 2025. Prices will be announced closer to launch, but according to CarNewsChina, it’s expected to start at around 140,000 yuan ($19,500).
Source: TheKoreanCarBlog, Beijing Hyundai
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Tesla is rumored to be behind a large $4 billion lithium-iron phosphate (LFP) battery cell order with Korea’s LG Energy Solution.
Yesterday, LG reported having secured a $4.3 billion order for LFP battery cells from its new factory in the US from August 2027 to July 2030.
The Korean company didn’t confirm the identity of the customer, but it did mention that the cells will be used in stationary energy storage products, which prompted many people to speculate that Tesla is behind the order.
Tesla currently produces Megapacks and Powerwalls in the US with LFP battery cells from China.
We previously reported that this is a problem amid the trade war between the US and China.
As of last year, a 25% tariff already applied to battery cells from China, but this increased to more than 80% under Trump before he paused some tariffs on China. It remains unclear where they will end up by the time negotiations are complete and the trade war is resolved, but many expect it to be higher.
Prior to Trump taking power, Tesla had already planned to build a small LFP battery factory in the US to avoid the 25% tariffs.
The automaker had secured older manufacturing equipment from one of its battery cell suppliers, CATL, and planned to deploy it in the US for small-scale production.
Tesla recently unveiled some images of the factory, which it claims is almost complete, but it is expected to be limited to less than 10 GWh of LFP battery cell production per year at full capacity, while Tesla produces more than 40 GWh of energy storage products per year in the US.
LG’s LFP battery cells made in the US would enable Tesla to close the gap between its own battery cell production and its Megapack and Powerwall production.
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