Indonesia GDP Surges to 3-Year High on State Spending

Trump Sets Clear Condition for Fed Chair Nominee

President Donald Trump has stated he would have refused to nominate Kevin Warsh to lead the Federal Reserve if Warsh had expressed any desire to raise interest rates.

"If he came in and said, 'I want to raise it,' he would not have gotten the job, no," Trump said during an NBC News interview on Wednesday.

The president added there was "not much" doubt that the Fed would ultimately lower rates. He argued that rates are "way high" even though the U.S. is "a rich country again." When asked if Warsh understood the president's preference for lower rates, Trump responded, "I think he does, but I think he wants to anyway."

A Challenge to Federal Reserve Independence

Trump's comments are poised to become a central issue during any potential confirmation process for Warsh, bringing the Federal Reserve's political independence under intense scrutiny.

While the president said he believed "in theory" that the central bank is an independent body, he also asserted that his own economic predictions should be considered because he is a "smart guy."

These remarks follow a months-long pressure campaign from Trump aimed at outgoing Fed Chair Jerome Powell, urging him to cut interest rates. Although administration officials have denied any intention to undermine the Fed's autonomy, Powell has described a related probe into the bank as a thinly veiled attack on its ability to set monetary policy independently.

Confirmation Battle Complicated by Senate Blockade

The nomination process faces additional political obstacles. Republican Senator Thom Tillis, a member of the Banking Committee, has pledged to block any of Trump’s nominees to the central bank.

Tillis’s blockade will remain until the Justice Department concludes an investigation into the Federal Reserve's renovation project. Trump, however, dismissed this threat on Wednesday, saying "a lot of people say a lot of things." He also repeated his own criticism of the construction project, stating, "This guy has spent so much money."

Who is Kevin Warsh?

Kevin Warsh is a former Fed governor who previously developed a reputation as an inflation hawk. More recently, however, he has voiced support for lower interest rates, a policy stance that appears to align with the president’s demands.

Regional Market Overview And Wall Street Spillover

Technology Stocks As The Epicenter Of Volatility

Japan’s Mixed Picture And The Topix Exception

Cryptocurrencies And Risk Sentiment

Source: CNBC

Chicago soybean futures surged Thursday, driven by comments from U.S. President Donald Trump indicating that China is ramping up its purchases of U.S. agricultural products.

The most-active soybean contract on the Chicago Board of Trade (CBOT) gained 0.8% to trade at $11.01-1/2 a bushel as of 0412 GMT. In contrast, other major grains softened, with CBOT wheat falling 0.2% to $5.25-1/2 a bushel and corn dropping 0.2% to $4.28-1/2 a bushel.

Trump's Comments Trigger Market Optimism

The rally in soybeans gained momentum after the commodity hit a two-month high on Wednesday. The move followed a post on President Trump's Truth Social platform stating that China is "lifting the soybean count to 20 million tons for the current season." He added, "They have committed to 25 million tons for next season!"

This development is significant as China had largely withdrawn from the U.S. soybean market during the prolonged trade war between the two nations. Traders are now closely monitoring for any further signs of renewed buying interest.

"Typically Chinese purchases of U.S. soybeans taper off from January," noted Sean Hickey, an analyst at Bendigo Bank Agribusiness. "Regardless, the lift to 20 million metric tons of U.S. soybean purchases will add some much-needed boost to the soy complex."

By late January, China had already purchased approximately 12 million tons of U.S. soybeans, fulfilling a commitment announced after a trade truce in late October began to thaw relations.

Record Brazilian Supply Limits Price Gains

Despite the bullish news, gains in the soybean market were capped by the prospect of ample global supply, primarily from South America.

Brazil, the world's top soybean producer and exporter, is in the process of a rapid harvest of what is projected to be a record-breaking crop. "An all-time record Brazillian crop, which is being quickly harvested, will soon begin to capture Chinese demand," Hickey explained.

This supply pressure is expected to continue. On Monday, consultancy firm StoneX raised its forecast for Brazil's 2025/26 soybean production by 2.3% from its January projection, now anticipating a crop of 181.6 million tons.

Looking ahead, China is expected to rely heavily on Brazilian soybeans through the first half of 2026. Record production levels and competitive pricing are set to drive shipments from Brazil, even as U.S. supplies become available. This pattern was evident last year when China's soybean imports from May to October hit record highs, with buyers favoring South American cargoes to avoid the elevated tariffs on U.S. products.

Diplomatic Signals And Immediate Market Reaction

Trump’s Rhetoric And The Volatility Channel

Market Structure Signals Ongoing Supply Anxiety

Source: CNBC

Indonesia's economy expanded by 5.11% in 2025, posting a modest acceleration over the 5.03% growth recorded in 2024. The performance, driven by a rebound in domestic demand, fell short of the government's 5.2% target but landed within Bank Indonesia's forecast range of 4.7% to 5.5%.

While the full-year figure points to resilience, it also highlights significant challenges facing Southeast Asia's largest economy.

Exports and Holiday Spending Fuel Growth

A strong export sector was a primary engine of economic activity. According to Statistics Indonesia, exports grew 6.15%, powered by increased shipments of key commodities like palm oil, iron, and steel. Notably, exports of nickel and its derivatives to China, along with electronics, textiles, and footwear to the U.S., saw double-digit increases despite "reciprocal" tariffs from the Trump administration.

Domestically, the economy saw a late-year surge, with GDP expanding 5.39% year-on-year in the fourth quarter, up from 5.04% in the third. This boost was largely attributed to seasonal consumer activity, as household consumption and transportation spending rose during the Christmas and New Year holidays. However, this occurred even as severe floods and landslides in northern Sumatra caused substantial economic losses.

Major Headwinds Challenge Prabowo's 8% Goal

Despite the positive headline numbers, several underlying weaknesses pose a threat to President Prabowo Subianto's ambitious goal of achieving 8% annual growth by 2029.

Mass layoffs across industries from textiles to tech startups in recent years have weakened consumer purchasing power and slowed private consumption. This internal pressure is compounded by external challenges, including ongoing trade wars and geopolitical tensions.

Domestic market stability has also been shaken. Key concerns include:

• The Indonesian rupiah fell to a new historic low against the U.S. dollar last month.

• A warning from global index provider MSCI triggered a stock market sell-off.

• The market rout led to the resignations of the chiefs of both the stock exchange and the Financial Services Authority.

Stimulus Spending Pushes Deficit to Legal Limit

To support the economy, the government deployed a 110.7 trillion rupiah ($6.6 billion) stimulus package in 2025. The package included utility bill discounts, value-added tax incentives, and social assistance for low-income families. This spending was separate from the 71 trillion rupiah allocated to major programs like President Prabowo's free meals initiative for children.

Finance Minister Purbaya Yudhi Sadewa acknowledged that the state budget was critical to sustaining growth. However, this fiscal support pushed the budget deficit to 2.92% of GDP, bringing it dangerously close to the legal ceiling of 3%.

Defending the strategy, Sadewa told reporters last month, "I can make the deficit zero, but the economy would be in disarray." For the coming year, the government is targeting a growth rate of 5.4%.

Lebanon's Economy Minister, Amer Bisat, has openly acknowledged the deep crisis of confidence plaguing the nation, admitting that trust from both Arab and local investors was "lost very quickly" during its prolonged economic collapse. Since 2019, the country has been mired in a severe financial crisis, fueled by decades of corruption and government mismanagement.

The fallout has been catastrophic. The collapse has decimated economic output, drained public finances, and shattered faith in state institutions. For ordinary people and businesses, it has meant losing access to their own money trapped in the nation's banking system. With investors wary and reform efforts stalled by political gridlock, the path to recovery remains fraught with challenges.

"Our relationship with our Arab investors is as fractious or problematic as it is with the Lebanese investors," Bisat stated at the World Governments Summit in Dubai. "Let's not forget that we all went through a horrible period."

A Plan Without Funding

According to Bisat, the Lebanese government is now focused on practical measures to slowly rebuild trust and showcase the country's economic potential. "Our objective is to look forward and regain confidence," he said. "We're trying to do the serious hard work of bringing back confidence, slowly but surely."

While a recovery strategy is in place, its success hinges on external support. "We have the plan," Bisat confirmed, but "the money has to come from our friends."

Lebanon’s priority is to secure this funding through grants and highly favorable loans rather than taking on more debt. "We want to borrow them at concessional rates, very cheap interest rates. We need the money," he explained. The country's ability to access traditional capital markets is virtually non-existent, underscored by a 'C' sovereign rating from Moody's, reflecting ongoing defaults and deep financial distress.

Rebuilding Crucial Ties with Gulf Nations

For decades, investment from Gulf countries was a vital source of foreign currency for Lebanon. However, the financial crisis, compounded by tensions over the influence of the militant group Hezbollah, led many Gulf states to pull back.

The challenge of attracting investment was highlighted when the UAE-based Al Habtoor Group announced it would halt all its operations in Lebanon, which include a major hotel and a theme park, amid a legal dispute with the government.

Despite such setbacks, Beirut is pushing to signal that it is open for business. Bisat pointed to a government-organized conference in November that attracted 50 international firms, including Goldman Sachs, Accor, and BlackRock. "They're interested in Lebanon," he insisted. "Lebanon has so much opportunity."

The Slow Thaw in Relations

While most Gulf nations remain hesitant to commit significant capital until Lebanon implements reforms approved by the International Monetary Fund, there are signs of a cautious re-engagement. Qatar has taken a notable step, announcing over $430 million in aid to help stabilize Lebanon's struggling energy sector.

Diplomatic engagement has also intensified. Bisat noted increased bilateral visits and interest from Gulf sovereign wealth funds since the current government took office. "You can see it at many levels," he said, citing renewed contacts with the UAE, Kuwait, Qatar, and even Saudi Arabia after years of silence. "The engagement is there. And more important than the engagement is the attitude. The attitude is very positive."

The Saudi Arabia Challenge

Restoring a full relationship with Saudi Arabia is a top priority. Lebanon is focused on three key areas:

• Removing restrictions on Lebanese exports.

• Enabling the return of Saudi tourists and business people.

• Advancing economic, cultural, and environmental agreements.

Saudi Arabia was Lebanon's leading market for agricultural exports in 2019, but Riyadh suspended imports of fruits and vegetables in April 2021 over drug-smuggling concerns. A travel ban for Saudi citizens has also been in place since 2021 due to security issues. To mend this, Lebanon must demonstrate it is taking control. "We need to assure them that we're not exporting drugs," Bisat said, noting efforts to improve technical controls and scanning systems.

Ultimately, deeper engagement from the Gulf depends on tangible progress. "We have to do our homework," Bisat concluded.

Future Ambitions: Economic Zones and Tech Hubs

Looking ahead, Lebanon has plans for a southern economic zone, a project first raised by U.S. officials as part of a broader stabilization effort. However, Bisat clarified that discussions are premature. "The first thing is that the war has to finish," he stated, referring to the ongoing hostilities with Israel. Rebuilding the south remains a "huge priority, socially, morally, politically." The World Bank estimates the cost of reconstruction and recovery from the war at $11 billion.

In the meantime, the government is advancing other economic zone projects in Tripoli and at the Beirut port. The strategy also includes a significant push into high-end technology.

"We now have virtual free zones for tech," Bisat said, adding that Lebanese companies are already producing advanced technology, including "chips for AI that Nvidia is buying." This focus on innovation represents a key part of Lebanon's vision for a post-crisis economy.