Russia Warns of Retaliation as EU Considers Using $105 Billion in Frozen Assets for Ukraine

Political

Russia-Ukraine Conflict

Summary:

Russia has issued a stark warning that the European Union's proposed plan to use $105 billion in frozen Russian assets to support Ukraine could be seen as an act of war...

Political Overview

Tensions between Russia and the European Union have escalated following the European Commission’s proposal to unlock $105 billion (€90 billion) in frozen Russian assets to help finance Ukraine’s war recovery. These funds, primarily held in Euroclear accounts in Belgium, have been frozen since Russia’s full-scale invasion in 2022. The EU’s dual-option plan includes issuing a “Reparations Loan” or borrowing from international markets, though it favors the former to avoid direct budgetary burdens on member states.

This funding represents roughly two-thirds of Ukraine’s estimated $136.5 billion financing gap from 2026 to 2029, as calculated by the IMF. The Commission argues that the loan would only be repaid by Ukraine if Russia were to pay reparations, thus framing it as a conditional mechanism rather than an act of asset seizure.

Russian Reaction

Dmitry Medvedev, Deputy Chairman of Russia’s Security Council, sharply criticized the EU’s proposal on Telegram, describing it as “tantamount to casus belli” an act that could justify war under international law. He specifically targeted the idea of using frozen central bank funds to issue a reparations loan, labeling it as theft disguised in legality. Russia has long warned of retaliation if such assets are used, and this latest escalation reinforces the potential for retaliatory financial or cyber actions.

While Russia's rhetoric may be intended to deter European action, it underscores how financial warfare through sanctions and asset freezes has become a central front in the geopolitical conflict.

Legal and Political Risks for the EU

The legal implications of using frozen assets for funding a third-party war effort remain a grey zone in international law. Belgium, home to Euroclear, has voiced caution and is advocating for burden-sharing among EU member states to mitigate legal risk if Russia seeks legal recourse post-conflict.

The EU’s ability to act is further constrained by political division. Unanimity is required for borrowing decisions, and Hungary remains opposed to providing further aid to Ukraine, potentially blocking this route. However, asset usage could proceed under qualified majority voting, sidestepping Hungary’s veto.

Diplomatic Backdrop: Parallel Peace Talks

The funding debate coincides with a renewed push for peace. U.S. special envoy Steve Witkoff is holding talks with Ukraine’s national security chief Rustem Umerov in Miami, while French President Emmanuel Macron has traveled to Beijing to urge President Xi Jinping to support a diplomatic resolution. Meanwhile, former U.S. President Donald Trump revealed ongoing dialogue between his envoy and Moscow, describing the talks as “reasonably good,” though no concrete peace plan has emerged.

An earlier, secret 28-point peace proposal crafted jointly by the U.S. and Russia and later presented to Ukraine appears to remain under consideration. However, the lack of clear consensus among the involved parties continues to stall progress toward a resolution.

Market and Geopolitical Implications

If the EU proceeds with the asset usage plan, retaliation from Russia could manifest in multiple forms asset seizures in response, retaliatory cyberattacks, or escalated hybrid warfare. Investors may also see increased geopolitical risk pricing in European financial markets, particularly in Belgium, where the assets are concentrated.

Should peace talks falter, the EU may feel increasing pressure to financially support Ukraine unilaterally, raising both budgetary and political costs. Conversely, if the EU fails to act decisively, Ukraine’s economic stability could deteriorate further, undermining its defense capabilities and regional stability.

Source: CNBC

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Gerik

Economic

Market Overview and Key Developments

BOJ Governor Kazuo Ueda appears to have successfully won political support for a December quarter-point rate hike, likely lifting Japan’s benchmark rate to 0.75% its highest in three decades. This pre-signaled move, coupled with the yen's persistent weakness and elevated inflation concerns, has calmed market fears of political resistance.

Finance Minister Satsuki Katayama and even Takaichi’s traditionally dovish economic aides have expressed conditional support, particularly if yen depreciation continues. Behind the scenes, the BOJ has worked to align its messaging with government priorities, highlighting a gradual approach that emphasizes economic stability and long-term growth.

Political and Strategic Dynamics

Governor Ueda's strategy has been rooted in diplomacy and cautious signaling. His carefully crafted December 1 speech praised “Abenomics,” connecting the legacy of fiscal stimulus with the current need for normalization. Takaichi, who previously opposed early tightening, now shows signs of alignment likely driven by concerns over yen weakness and inflation’s impact on public support.

The central bank’s independence, while protected by law, remains politically fragile. The BOJ governor and board members require government nomination and parliamentary approval, making the institution attuned to political sentiment.

Market Sentiment and Policy Trajectory

Markets have priced in an 80% probability of a December hike, but the outlook beyond that remains less defined. The challenge now lies in how the BOJ communicates its path forward amid wide disagreement over Japan’s “neutral rate” estimated loosely between 1% and 2.5%.

Swap market projections imply a terminal rate around 1.5% by mid-2027. However, economic adviser Takuji Aida advocates holding steady at 0.75% until 2027, which could restrain Ueda’s ability to tighten further.

Analysis: A Calculated Shift Toward Normalization

This policy move reflects a delicate balance between maintaining credibility and navigating Japan’s unique macroeconomic environment. Ueda’s gradualist, data-driven approach seems designed to avoid the risk of choking off growth while cautiously escaping from a decade-long ultra-loose stance.

The yen’s response will be critical. If Ueda’s communication on future hikes is too vague, the currency may resume its decline. Yet, a strong hawkish signal risks political backlash, especially if inflation eases or economic activity falters.

Technical Implications and Trade Ideas

If the BOJ confirms the hike and signals a moderate tightening path, expect yen stabilization or even mild appreciation particularly if U.S. Fed begins cutting rates in 2026. Long-term Japanese government bonds (JGBs) may face volatility due to uncertainty around terminal rates.

The December rate hike marks a potential policy inflection for Japan, but the future path is entangled in political and economic ambiguity. The BOJ’s next challenge will be to guide markets with greater clarity without triggering turbulence in either the bond market or political sphere

Source: Bloomberg

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Risk Warnings and Disclaimers

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Warren Takunda

Economic

Sentiment is set to be the overarching theme into year-end, and it's worth understanding who the winning and losing currencies will be under this setup.

Stocks are rising as confidence grows that the Federal Reserve is going to make everyone's life a lot easier by cutting interest rates next week.

"The resilience of risk assets is becoming impossible to ignore, most notably underscored by the S&P 500's seven-month winning streak, a milestone achieved only sixteen times since World War II," says Antonio Ruggiero, analyst at Convera.

The Real Big Story

But, perhaps, far more important than a mere 25 basis point rate cut, and it's likely to be the big story that is receiving very little attention, is that the Fed is already actively working away to turn up the mood music.

The Fed has officially ended its latest cycle of Quantitative Tightening (QT) as of 1 December 2025, which would traditionally dry liquidity from the system as the Fed stops exchanging bonds for reserves as it runs down its bloated post-crisis holdings of government bonds

But it's also injecting $13.5BN via overnight repos into the banking system, meaning it is actively no longer draining liquidity, reversing the prior trend. That’s significant because this is reportedly the second-largest such injection since the COVID-19 crisis.

In plain terms: the Fed is telling banks, "we won’t keep draining cash from the system, in fact, here’s more cash now."

Ruggiero says the S&P's remarkable rally is being fueled by a distinct shift in liquidity dynamics at the Fed.

"This operation, the second largest since the pandemic and surpassing peaks seen during the Dot-Com bubble, suggests that the financial 'plumbing' is now primed to support further risk-taking," he says.

The Currency Winners and Losers to Watch Out For

The liquidity injection is supportive of investor risk-taking and presents the prospect of fresh advances by global equity markets.

For currencies, there's a relatively simple rule of thumb in that those with a high beta to equity movements will benefit, i.e. those currencies that have a strong correlation with global sentiment.

Those currencies seen as a safe harbour during market setbacks are likely to come under pressure.

These are the higher-beta, in descending order of strength, pro-cyclical or commodity-linked currencies that usually strengthen when global risk appetite improves:

AUD - Australian dollarHigh-beta, commodity-linked, strongly correlated with global growth and equity sentiment.

NZD - New Zealand dollarVery similar risk profile to AUD, tends to outperform when markets turn optimistic.

NOK - Norwegian kroneHigh-beta and heavily oil-linked; one of the most sensitive currencies to risk sentiment.

CAD - Canadian dollarCommodity-linked and tends to appreciate when equities and global demand rise.

SEK - Swedish kronaA higher-beta European currency; often behaves pro-cyclically and benefits from improved global sentiment.

GBP - British poundModerate beneficiary. Not a pure high-beta currency, but usually strengthens when USD and JPY weaken in risk-on phases.7.

EUR - EuroMild beneficiary. Not high-beta, but tends to rise when USD softens in broad risk-on conditions.

(GBP/EUR tends to benefit on account of GBP being higher in the 'risk-on' hierarchy.

G10 currencies that typically do not benefit (or underperform) in a risk-on setup

These are the classic safe havens that tend to weaken when investors rotate out of defensive assets:

JPY - Japanese yenPure safe-haven; usually weakens when global risk sentiment improves.CHF - Swiss franc

Another classic safe-haven; underperforms when markets move into risk-taking mode.

USD - US dollarNot a traditional safe-haven in the same way as JPY & CHF, but the USD usually underperforms in broad risk-on phases as capital rotates to higher-yielding currencies.

Source: Poundsterlinglive

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Gerik

Economic

Market Overview: A Rally Fueled by Fed Speculation

U.S. stock markets surged for a second consecutive day on Wednesday, buoyed by investor bets that the Federal Reserve may cut interest rates in its upcoming December 9–10 meeting. The Dow Jones Industrial Average led the gains with a jump of 0.86%, followed by the S&P 500 with a 0.30% rise and the Nasdaq Composite with a more modest 0.17% uptick. This rebound came despite or perhaps because of a surprisingly poor U.S. jobs report from payroll firm ADP, which showed the private sector lost 32,000 jobs in November. This was in stark contrast to the 40,000 job gain expected by analysts.

The disappointing employment figure paradoxically reinforced the idea that the Fed might pivot to easing monetary policy sooner than previously anticipated. With the CME FedWatch tool indicating nearly 89% probability of a December rate cut, markets are pricing in relief rather than reacting to the underlying economic fragility the job losses represent.

European and Asian Markets Track Global Sentiment

European markets opened higher on Thursday, echoing the upbeat sentiment. The pan-European Stoxx 600 rose by 0.34%, with Germany’s DAX surging 0.87% and France’s CAC 40 up 0.49%. While sector performance was mixed, standout individual performances came from Inditex, which climbed on the back of strong earnings, and Stellantis, whose stock rose after a UBS upgrade.

Meanwhile, Asian markets largely followed suit, with Japanese equities leading regional gains. Investors across the Asia-Pacific region are also preparing for the U.S. Fed decision, while digesting local policy dilemmas such as Japan’s central bank facing increasing pressure from surging bond yields.

Macro Risks: Labor Market Strains and Policy Dilemmas

Despite market euphoria, the job data reveals a structural concern. Continued labor market weakness could signal the start of a broader economic downturn. Moreover, while short-term rate cuts might boost portfolios, they also underscore economic softness posing risks to consumer spending and corporate investment.

In Japan, the Bank of Japan finds itself in a policy dilemma as bond yields soar to their highest level since 2007. The 10-year Japanese government bond yield touched 1.917% on Thursday, intensifying the challenge of balancing growth support with inflation control.

Geopolitical and Tech Developments

Geopolitical tensions remain a background influence. Ukrainian peace talks are under renewed focus, with meetings in Miami and pressure from European leaders such as Emmanuel Macron urging China's cooperation. Meanwhile, Putin’s visit to India signals deeper Russia-India ties amid global shifts.

On the tech front, Nvidia CEO Jensen Huang’s discussion with Donald Trump over chip export restrictions highlights the escalating strategic importance of AI hardware. In Asia, Singapore's Horizon Quantum announced it is the first private firm to commercially run a quantum computer in the country, with an eye toward a U.S. public listing.

Analyst Insight: Cash and Caution Prevail

Despite the equity rally, some investors remain cautious. Dan Niles of Niles Investment Management emphasized that "cash is king" in the current uncertain climate, although he sees select opportunities in resilient sectors. His view reflects a broader sentiment among market veterans who warn that premature celebrations could be masking latent macro risks.

Markets are enjoying a sugar rush from the possibility of looser monetary policy, but the underlying fundamentals particularly labor market weakness and geopolitical instability suggest that volatility may return swiftly. The rally may persist in the near term, but its durability depends heavily on December's Fed actions and subsequent macroeconomic indicators. Investors should temper optimism with prudence.

Source: CNBC

To stay updated on all economic events of today, please check out our Economic calendar

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Glendon

Russia-Ukraine Conflict

Russia is preparing a strong response to any "illegal action" by the European Union regarding frozen Russian assets, according to statements made Thursday by Russian Foreign Ministry spokeswoman Maria Zakharova.

Zakharova warned that such actions by the EU would "elicit the harshest reaction" from Moscow, emphasizing that Russia is already formulating its response to potential EU moves.

"Any illegal action in relation to our assets will lead to the harshest reaction," the Russian Foreign Ministry stated.

Source: Investing

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Samantha Luan

Political

· Group of 16 US citizens, 1 Canadian abducted in 2021

· Joly 'Yonyon' Germine directed kidnapping from jail in Haiti

· Most hostages were held for 62 days before escaping

· Germine turned over to US following hostage drama

The former head of the notorious Haitian gang 400 Mawozo was sentenced on Wednesday in a U.S. court to life in prison for masterminding the 2021 kidnapping of a group of American missionaries.

Joly "Yonyon" Germine, 34, was found guilty in May following a 10-day trial of one count of conspiracy to commit hostage-taking and 16 counts of kidnapping a U.S. national for ransom, according to the U.S. Attorney's Office for the District of Columbia.

Germine, who has been in U.S. custody since May 2022, had previously pleaded guilty and was sentenced to 35 years in prison for his role in smuggling U.S. firearms to Haiti and laundering ransom money paid to his gang for other abductions.

Under the sentence he received on Wednesday, in U.S. District Court in Washington, he will not be eligible for supervised release, the federal equivalent of parole.

The life sentence stems from the role he played while imprisoned in Haiti in orchestrating the kidnapping of 16 U.S. citizens, including five children, who were part of the Ohio-based Christian Aid Ministries organization. A Canadian member of the Mennonite missionary group also was taken.

The victims were returning from a visit to an orphanage in Haiti when they were abducted on October 16, 2021, by masked gunmen from 400 Mawozo, which operated in an area east of Port-au-Prince, the Haitian capital, according to evidence presented at trial.

The gang members drove their captives to a field, robbed them at gunpoint and demanded $1 million in ransom for each hostage to secure their freedom, all while consulting by phone with Germine, prosecutors said.

The gang initially threatened on social media to kill the hostages if ransom was not paid. But early on in the hostage negotiations, senior gang leaders offered to accept Germine's release from Haitian custody in lieu of ransom payments.

Most of the missionaries ended up being held for 62 days before they managed to escape under cover of darkness and hike out of the gang's territory. Five of the hostages had been released earlier.

Evidence at trial showed that Germine directed the initial kidnappings, arranged for the locations where the hostages were taken and set the $17 million total ransom demand, knowing it was too high to be paid and would lead to his own negotiated release from prison.

Ultimately, Germine, the former leader and self-described "king" of 400 Mawozo, was turned over by Haiti to the United States at the request of the U.S. government.

Kidnappings for ransom remain rampant in Haiti. The U.N. reported nearly 1,500 last year and almost 2,500 in 2023.

Source: Reuters

Risk Warnings and Disclaimers

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Michelle

Economic

China announced on Thursday it is issuing streamlined rare earth export licenses, fulfilling a key promise made during the recent meeting between U.S. President Donald Trump and Chinese President Xi Jinping that helped ease trade tensions between the two countries.

In early April, Beijing added several rare earth elements and magnets to its export control list, requiring dual-use licenses for exports. This move caused China's exports of rare earth magnets to drop significantly in April and May, forcing some global automakers to temporarily halt parts of their production.

"China has been actively making use of general licenses and other facilitation measures to promote compliant trade in dual-use items," state news outlet Xinhua reported on Thursday, citing a Commerce Ministry weekly briefing.

Commerce Ministry spokesman He Yadong told reporters at the weekly briefing, "As long as export license applications for rare earth-related items are for civilian use, the government has given timely approval."

The new general licenses are designed to allow more exports under year-long permits for individual customers, according to reports from early November.