China's Digital Yuan Now Pays Interest in Global Push

A partial US government shutdown appears to be ending after President Donald Trump intervened to convince conservative hardliners to drop their opposition to a funding deal he negotiated with Senate Democrats.

The spending package cleared a critical procedural vote in the House on Tuesday, with a final vote expected later in the day. In a key sign of shifting momentum, only one Republican voted against moving the legislation forward.

Conservative Opposition Crumbles

The breakthrough came after a small group of conservatives threatened to derail the entire process. They had demanded that a separate bill on election laws, which stood no chance of passing the Senate, be attached to the government funding measure. With a razor-thin majority, Republican leadership could only afford to lose one vote.

President Trump’s pressure proved decisive. "The president nailed it down," said House Appropriations Committee Chairman Tom Cole, a Republican from Oklahoma. "I'm glad we are all nails and there's one hammer."

On Monday, Trump urged House Republicans in a social media post to pass the bill "IMMEDIATELY" with "NO CHANGES." Shortly after, conservative holdouts Anna Paulina Luna of Florida and Tim Burchett of Tennessee announced they would end their blockade following a conversation with the White House.

Still, some conservatives remain opposed to the deal itself, citing spending increases and projects favored by Democrats. "I don't understand why we took the deal that we took," said Republican Representative Eric Burlison of Missouri. "There's tons of Democrat earmarks in the bill."

The Standoff Over Homeland Security

The shutdown fight was triggered last month after Alex Pretti, a US citizen, was killed during a confrontation with Border Patrol officers in Minneapolis. In response, Democrats refused to approve full-year funding for the Department of Homeland Security without new restrictions on immigration enforcement.

The current deal, which passed the Senate before the shutdown began Saturday at 12:01 am, acts as a temporary patch. It funds the Homeland Security Department through February 13, allowing more time for negotiations on enforcement policies. All other shuttered government departments would be funded through the end of the fiscal year on September 30.

Democrats are seeking several key changes to immigration enforcement, including demands that officers:

• Wear body cameras

• Forgo wearing masks

• Obtain warrants before entering private homes

• Cease conducting immigration sweeps

Final Passage Still Faces Hurdles

While the bill is likely to pass, its success is not guaranteed. Republican leaders will need support from moderate Democrats to offset the remaining conservative opposition.

Most Democrats are expected to vote against the measure because it fails to immediately implement the immigration enforcement reforms they have called for. However, some have signaled they may support it, including Rosa DeLauro of Connecticut, the top Democrat on the House Appropriations Committee. The position of House Democratic leader Hakeem Jeffries remains unannounced.

California Democrat Jimmy Gomez noted that while "a few" Democrats might vote for the bill, many remain passionately opposed. Angie Craig, a Minnesota Democrat running for a Senate seat, stated her firm opposition: "Unless they're gonna start to bring down the surge in Minnesota for real, I'm not voting for anything."

Shutdown's Real-World Consequences Mount

As the political maneuvering continues, the shutdown's effects are beginning to spread. The Labor Department announced on Monday that its widely-followed jobs report, scheduled for Friday, will be delayed. The tax filing season, which recently began, could also face disruptions.

The shutdown has furloughed non-essential federal workers and closed several key government departments, including:

• Defense

• State

• Treasury

• Health and Human Services

• Housing and Urban Development

• Labor

• Education

Smaller agencies like the Small Business Administration and the Securities and Exchange Commission are also affected.

Oil prices found their footing on Tuesday, recovering slightly after a sharp sell-off in the previous session as traders weighed cooling geopolitical tensions between the U.S. and Iran against a new trade pact between the U.S. and India.

At 11:27 ET, Brent oil futures for April delivery were up 1% to $66.94 a barrel, while West Texas Intermediate (WTI) crude futures climbed 1.1% to $62.84 a barrel. This marks a reversal from Monday, when both benchmarks tumbled by more than 4%.

Diplomacy Eases Middle East Tensions

The primary catalyst for the market's recent volatility is a significant de-escalation in the standoff between Washington and Tehran. U.S. President Donald Trump remarked that Iran was "seriously talking" with the U.S., a comment that immediately eased fears of an imminent conflict.

Adding to the diplomatic momentum, reports confirmed that the U.S. and Iran are set to resume negotiations over Tehran's nuclear program this Friday in Turkey.

This news has helped pull some of the risk premium out of oil markets. For weeks, the threat of a regional war in the Middle East had supported crude prices, especially after the U.S. deployed warships to the region. However, it remains unclear if Friday's talks will lead to a breakthrough, as earlier negotiations have produced limited results.

US-India Trade Deal Reshuffles Global Oil Flows

Markets are also digesting a major trade agreement between the United States and India. Under the deal, the U.S. will slash tariffs on Indian goods from 50% to 18%. In return, India has agreed to halt its purchases of Russian oil and lower its own trade barriers.

This shift could have significant consequences for global supply dynamics. Analysts at ING noted that if India stops buying from Russia, it "will only lead to a further increase in the amount of Russian oil floating at sea."

This scenario would create downward pressure on the price of Urals crude as Russia seeks new buyers. "A lack of buyers means Russia would ultimately be forced to reduce output, tightening up the oil market," the analysts added.

Dollar's Pause Offers Crude a Breather

Currency market movements also played a key role. The U.S. dollar had strengthened late last week and on Monday, weighing on oil and other commodities.

The dollar's gains were fueled by the nomination of Warsh, who is viewed as a less dovish pick for the Federal Reserve than markets had anticipated. While he is still expected to oversee interest rate cuts, he is also projected to limit the central bank's asset-buying programs. This prospect of a less loose monetary policy boosted the greenback.

On Tuesday, however, the dollar's advance stalled, providing some support for crude prices and allowing them to edge higher.

President Donald Trump has made it clear he prefers negotiating a deal with Iran to starting a war. The critical question, however, is what kind of deal he’s willing to sign—and what compromises, if any, Tehran is willing to make.

As of this writing, the two sides have agreed to meet for negotiations in Istanbul, Turkey, on Friday, December 6. The meeting will bring together U.S. Special Envoy Steve Witkoff and Iranian Foreign Minister Abbas Araqchi, along with representatives from Saudi Arabia and Egypt.

The logic is straightforward: the more aggressive Trump’s demands, the less likely Iran is to concede, making a military confrontation more probable. Conversely, a more flexible U.S. position could encourage cooperation from Tehran and reduce the chances of war. So, what exactly is on the table?

The Nuclear Sticking Point: Dismantle or Delay?

The primary issue is Iran's nuclear program, but Trump's specific goal has been inconsistent. In May of last year, he demanded the "total dismantlement" of Iran's nuclear infrastructure. More recently, however, he simply tweeted "NO NUCLEAR WEAPONS." These are two vastly different objectives.

Every U.S. president since George W. Bush has aimed to prevent Iran from acquiring a nuclear bomb. If this is Trump's sole objective, Tehran will likely engage in its usual strategy of bargaining, deception, and concealment to avoid a direct conflict with the superior U.S. military. Iran might agree to give up its highly enriched nuclear material but would fight to keep its program intact, effectively buying time until Trump is out of office to resume enrichment activities.

However, if Trump insists on the complete termination of Iran's entire nuclear program, Tehran will almost certainly refuse. This isn't just because of the immense time, money, and effort invested. For Supreme Leader Ali Khamenei, such a move would be seen as a surrender to the "Great Satan," a term he and his predecessor Khomeini use for the United States. Faced with this choice, Khamenei might prefer to risk a war—betting on Trump's aversion to open-ended conflicts—rather than sign what he would view as a capitulation agreement.

Beyond the Bomb: Missiles and Internal Dissent

Other critical issues will feature prominently in any negotiation, including Iran's missile arsenal, its network of regional militias, and the recent crackdown on domestic protests.

Initially, Trump appeared to support the Iranian protesters, threatening military action if the regime continued its violent suppression. His focus, however, seems to have shifted back to security matters. This is not surprising, as the human rights situation in Iran has consistently taken a backseat to security priorities for every U.S. administration dealing with the Islamic Republic.

Iran's missile program, a major concern for Israel and Gulf Arab states, is an even more complex issue than its nuclear ambitions. It is highly doubtful, perhaps even inconceivable, that Iran would surrender the one weapon system that it sees as a shield against foreign intervention. The negotiating space on missiles is far narrower than on the nuclear file, and Khamenei and his generals are unlikely to offer any meaningful concessions. From their perspective, it would be better to use those missiles in a war for survival than to give them up and leave Iran vulnerable.

Tehran's Proxies: The Biggest Bargaining Chip?

Perhaps the greatest potential for a breakthrough lies with Tehran's regional proxies. These groups—including Lebanon's Hezbollah, Yemen's Houthis, various Iraqi militias, and Palestinian factions like Hamas and Islamic Jihad—are vital tools for projecting Iranian power.

Unlike its nuclear program and missile arsenal, these proxies are not an existential issue for the regime. If abandoning some or all of its regional allies could prevent a devastating war with the United States, Iran might consider it. Furthermore, Tehran knows that enforcing such an agreement would be incredibly difficult for Washington. The Iranian regime has extensive experience smuggling weapons and funds to its militia networks, making any commitment hard to verify.

The High Stakes for Washington's Credibility

Trump has deployed significant military assets to the region, seemingly to pressure Iran into a deal with major concessions. As Secretary of State Marco Rubio noted, the Islamic Republic is at its weakest point since its founding in 1979, making this an opportune moment for Washington to press its demands.

However, if Iran refuses to cooperate, the worst possible outcome for the U.S. would be a symbolic strike (or no strike at all) followed by a weak or ambiguous deal that Trump then frames as a diplomatic victory. Such a move would severely damage American credibility and embolden the Iranian regime more than ever.

Given Trump’s threats and military posturing, the only acceptable result for Washington is a verifiable and permanent agreement—achieved either peacefully or through force—that accomplishes three key goals:

• Ends Iran's path to a nuclear weapon.

• Limits its missile arsenal.

• Terminates its support for regional proxies.

While this outcome would address U.S. security concerns, it would not necessarily support the aspirations of the Iranian people. Washington and other regional powers, with the exception of Israel, appear to prefer a weakened but stable regime in Tehran over the potential chaos of a collapse that could destabilize the entire region.

Markets have shrugged off heavy metal(s) even though their plunge Friday was staggering. We are up around 5% in gold this morning following reports of queues of Singaporeans buying the dip yesterday. Yet note that this happened to an asset seen as a "safe-haven", and as the foundation of a new global system - even as nobody anywhere is close to demanding gold as payment for exports, or is able to do so if needed. Indeed, there are whispers that a key driver of, and much of the worst damage from, the pump-'n'-dump was centered in China (whose neo-mercantilism is ironically a key reason for fractures in fiat currency and the liberal world order). One wonders how long generic 'markets' can stay calm in a world in which so many people are so unenamoured of fiat FX; and how metals can cope with "because markets!" HFT speculation that make them trade like an NFT or meme stock.

Then again, markets seem to have put the extraordinary recent volatility in JGBs behind them when nothing has been resolved there. PM Takaichi seems set for a landslide victory on 8 February that will lead us back to where we were - save the US suggesting there's no bailout from it coming for Japan. That leaves the world's third largest economy, the $7.8 trillion JGB market, and JPY all on edge as Tokyo deals with rising geopolitical tensions with China over Taiwan.

Going back to Friday, a meme is that metals were heavy as Fed Chair nominee Warsh was seen as a hawk: yet there's as much likelihood of that being true as that he was picked for his looks. US rates are going to fall, but Warsh just looks hawkish. Moreover, a hawk/dove framing is arguably now irrelevant. What I dub 'reverse perestroika' implies a shift to a Treasury- not Fed-centric system and to industry from financialisation: logically that implies different interest rates by sector, so hawkish and dovish. As @mnicoletos puts it, it means changes to encourage banks to lend more into productive sectors. And as @ctindale points out, it requires abandoning abstract economist models of aggregate supply and demand -- useless vs shocks like rare earths -- to address specific material constraints in each sector, e.g., funding stockpiles to release rather than raising rates. If Warsh wants a 'regime change' at the Fed (as do Bessent and Trump), then that's the form it will take, comrades, not just 'hawk/dove'.

That's too late for those who ended up having to raise rates after cutting them, i.e., the RBA. Australia's property-addled economy and Reserve Bank are the first to U-turn on "because (property) markets" rate cuts, hiking to 3.85%, because of "materially" higher inflation, rather than the low inflation their abstract model had told them was looming. It looks like another hike is also going to have to follow. As the Aussie financial press put it, "Chalmers and Bullock both messed up on inflation – the RBA is finally trying to fix its inflation mistakes. When will the federal government follow suit?" Equally, when will abstract models follow suit? And when will markets grasp that is what logically follows on from all of this?

Oil slumped 4.5% Monday on the view Iranian threats of regional war are overblown. The US and Iran will talk Friday, yet the US wants a deal to end its nuclear program, which it bombed last year, and its ballistic missile program and support for terrorist proxies; Iran may float handing over enriched uranium, but says it will only act within its "national interests." Don't just read the financial press: follow the logistical build-up of US military power; consider reports Trump favors regime change following as many as 30,000 Iranian protestor deaths; and see there is no geostrategic logic in the US moving weapons into place then allowing Iran to carry on (including selling oil to China).

That's also as the START US-Russia arms control agreement STOPS on Thursday, kick-starting a new nuclear arms race. Europe might have to join this time. In which case, the politics are very complex --as Draghi called for an EU "federation" to avoid being "picked off one by one" by the US and China-- and as a nuclear trifecta could cost from hundreds of billions to a trillion euros. Add it to the Strategic Autonomy bill, as Europe finds that: it's struggling to coordinate defence efforts; even replacing the US-backed internal communication system for defence data will take until at least 2030; and as it was warned that its efforts to diversify critical minerals supplies have "incomplete foundations" due to their "nonbinding" targets.

By contrast, President Trump will launch Project Vault --$12bn in seed capital, $1.7bn private, the rest from a 15-year US Export-Import Bank loan-- to build a US strategic critical minerals stockpile. This is separate from the Pentagon's and is for the civilian economy. The intention is to insulate it from wild price swings in key inputs --something China has long done for key goods, but which the West has eschewed because of its brilliant intellectual conceit of "because markets" as the answer to everything -- as well as economic coercion - which China has again been able to threaten in rare earths "because markets."

Trump also struck a trade deal with India, reducing reciprocal tariffs to 18% and dropping the additional 25% after claiming India would stop buying Russian oil in favor of Venezuelan, showing how geopolitics links up. This isn't the FTA the EU just signed, but let's see which proves more important over time: as a well-placed Indian source noted to me, there's no growth in Europe vs. the US. The fact the US will insist on the same no-transshipment rules for Chinese goods that it has with other trade partners is a blow to Beijing; equally, it blows up European hopes of building a trade coalition without the US (and in India frictions will continue, i.e., the EU agreed on green tech collaboration with Delhi, but the US said it is going to sell it more coal). The defense component will also be key. Europe now has a strategic partnership with India in that regard, but national governments hold sway there: will they want to see their defense industries moved to South Asia(?) By contrast, the US is able to move faster, though we shall see what they are prepared to share with India. Delhi at least gets to play both sides off against the other.

Source: Zero Hedge

Source: decrypt

Japan and Asia lead gains

​Precious metals recover sharply

​Copper joins the rally

​UK miners benefit from commodity rebound

​FTSE 100 lags tech-heavy peers

​China's role in stabilising gold

​Volatility remains elevated

Source: ig