Trump Wants Greenland: What's the Price Tag?

The U.S. House of Representatives is set to approve a three-year extension of Affordable Care Act (ACA) subsidies, a move that puts it on a direct collision course with the Senate, where the bill is expected to fail.

These enhanced ACA tax credits, often called Obamacare subsidies, are a critical issue for millions of Americans who purchase health insurance on ACA marketplaces. Their scheduled expiration at the end of 2025 has already been linked to rising premiums and was a central conflict during last fall's record-long government shutdown.

House Pushes Through Extension Despite GOP Division

The vote on the House floor was made possible by a rare procedural maneuver. At the end of last year, four moderate Republicans joined Democrats in signing a discharge petition led by Minority Leader Hakeem Jeffries. This tool allows a majority of lawmakers to bypass leadership and force a vote on a bill.

The petition successfully cleared a key procedural hurdle on Wednesday, with nine Republicans ultimately voting with Democrats to advance the measure. This came despite opposition from Speaker Mike Johnson, highlighting a significant split within the Republican party on the issue.

Senate Signals A Swift Rejection

Even with House approval, the bill's prospects in the Senate appear nonexistent. Senator Bernie Moreno, a Republican from Ohio involved in bipartisan negotiations on the matter, was blunt in his assessment.

"What the House is going to pass tomorrow will not pass in the United States Senate," Moreno told reporters on Wednesday. He noted that the Senate had already voted down a similar three-year extension in December. "It probably wouldn't be put on the floor, because why waste floor time on something we've already considered?"

Ohio Senator Bernie Moreno has stated the House bill will not pass in the Senate.

Moreno did suggest, however, that the House bill could serve as a legislative "vehicle" that the Senate working group could amend with its own proposal.

Bipartisan Senate Group Seeks Compromise

That bipartisan working group, which includes Moreno and Senator Susan Collins of Maine, has been trying to broker a different deal. Members have indicated they are nearing an agreement on a two-year extension of the ACA tax credits, shorter than the House's three-year proposal.

Despite progress, several key disagreements remain before a final deal can be reached.

The Hyde Amendment: A Key Sticking Point

One of the most significant hurdles is the Hyde Amendment, a long-standing policy that bans the use of federal funds for most abortions. Many Republicans are pushing to strengthen its provisions as part of any healthcare deal.

The debate grew more complex earlier this week when President Donald Trump urged Republicans to be "flexible" on the Hyde Amendment, drawing some criticism from within his own party.

Moreno, however, maintained that the core principle was not up for debate. "We don't do federal funding for abortions," he said. "That's a long-standing tradition, nobody's looking to change that."

The U.S. economy is posting some of its most impressive productivity numbers in decades, a trend that is pushing down business labor costs and accelerating the fight against inflation. If artificial intelligence is the engine behind these gains, we may be at the dawn of a new era of efficiency. However, with the data shrouded in uncertainty, the Federal Reserve should treat this boom with caution, not as a clear signal to cut interest rates.

A Stunning Spike in Economic Efficiency

In the third quarter, labor productivity—the output per hour from nonfarm employees—jumped at a 4.9% annualized rate, the strongest performance since 2023, according to the Bureau of Labor Statistics. Excluding the unusual rebound periods following recessions, this marks the second-highest reading in 20 years.

At the same time, unit labor costs fell for the second quarter in a row, dropping 1.9% after a 2.9% decline in the prior period.

On the surface, this is great news. America's growing efficiency is creating a path for inflation to continue its three-year slowdown, even as the economy grows and the stock market hits record highs. Yet, the cause of this productivity surge remains unclear, leaving its sustainability—and its implications for interest rates—an open question for Fed policymakers.

The AI Factor: Revolution or Anomaly?

The most straightforward explanation may be the right one: artificial intelligence. According to the Census Bureau's Business Trends and Outlook Survey, about 18% of U.S. firms reported using AI in the past two weeks, a figure more than triple the adoption rate seen in early 2024. While a recent change in the survey's wording might account for some of this jump, the trend is undeniable.

Research suggests AI could be a game-changer for knowledge-based work.

• Marketing: A study by Harang Ju and Sinan Aral found that teams pairing humans with AI were a remarkable 73% more productive than all-human teams.

• Software Development: Another recent study showed that developers using an AI tool completed 26% more tasks.

However, the technology's impact isn't universal. One experiment involving taxi drivers found an AI tool provided a modest 7% productivity boost for low-skilled drivers but had almost no effect on those who were already proficient at their jobs. This suggests AI's effectiveness depends heavily on the industry, the context, and the initial skill level of its users.

The Fed's High-Stakes Policy Dilemma

The productivity boom presents a complex puzzle for monetary policy. While falling unit labor costs are disinflationary, higher productivity also tends to increase demand for investment capital and raise the economy's potential growth rate. Together, these forces can push up the "neutral" rate of interest—the level that neither stimulates nor restricts economic growth.

If policymakers focus only on cooling labor costs, they might be tempted to cut rates aggressively. This could leave financial conditions too loose, risking asset bubbles or a resurgence of inflation. Fed Governor Stephen Miran recently told Bloomberg Television he supports cutting the benchmark rate by another 150 basis points this year, to a range of 2% to 2.25%, arguing that current policy is restrictive and inflation is under control.

Yet, there are signs of lingering price pressures. A separate report from the Federal Reserve Bank of New York showed that consumers expect inflation to be 3.42% over the next year, up from 3.20% in the previous survey and well above the central bank's 2% target. After five years of elevated prices, these expectations could become a self-fulfilling prophecy if not managed carefully.

Given that both the future of productivity and the neutral interest rate are fundamentally unknowable, the most prudent path forward is a cautious one. The Fed should proceed slowly, waiting for more data on productivity, inflation, and the labor market. Central banking demands humility, especially on the cusp of a potential technological revolution.

The United States has officially pulled out of the Green Climate Fund (GCF), a major international climate institution based in South Korea, the Treasury Department announced Thursday. The decision is effective immediately.

This move comes just one day after President Donald Trump signed a memorandum to exit 66 global organizations identified as running contrary to U.S. interests.

Immediate Withdrawal from the GCF

In a formal notification to the Green Climate Fund, the Treasury Department confirmed the U.S. would not only withdraw from the fund but also give up its seat on the GCF board.

The GCF, headquartered in Incheon, was established in 2010 under the U.N. Framework Convention on Climate Change (UNFCCC). Its primary mission is to support developing nations in their efforts to mitigate and adapt to climate change. The Trump administration's withdrawal from the GCF is consistent with its previous decision to leave the UNFCCC.

Administration Cites Economic Priorities

The Trump administration justified the withdrawal by framing the GCF's objectives as incompatible with its own economic goals.

"Our nation will no longer fund radical organizations like the GCF whose goals run contrary to the fact that affordable, reliable energy is fundamental to economic growth and poverty reduction," said Secretary of the Treasury Scott Bessent.

The Treasury Department stated that continued U.S. participation was no longer consistent with the administration's priorities. It also reiterated a commitment to advancing all sources of affordable and reliable energy as essential tools for reducing poverty and fostering economic expansion.

A Broader Retreat from Global Pacts

The exit from the Green Climate Fund is part of a wider policy shift. On Wednesday, President Trump initiated the process to withdraw the U.S. from 66 international organizations, agencies, and commissions.

Secretary of State Marco Rubio explained that these organizations were flagged during a review of international bodies that the Trump administration considers "wasteful," "ineffective," and "harmful."

WASHINGTON (dpa-AFX) - After ending the previous session on opposite sides of the unchanged line, the major U.S. stock indexes are turning in another mixed performance during trading on Thursday.

While the Dow has moved back to the upside following yesterday's pullback, the tech-heavy Nasdaq has moved notably lower.

Currently, the Nasdaq is well off its worst levels of the day but still down 148.06 points or 0.6 percent at 23,436.21.

The S&P 500 is also down 4.34 points or 0.1 percent at 6,916.59, while the narrower Dow is up 179.84 points or 0.4 percent at 49,175.92.

The mixed performance on Wall Street comes as traders seem reluctant to make more significant moves ahead of the release of the Labor Department's closely watched monthly jobs report on Friday.

Economists currently expect employment to increase by 60,000 jobs in December after climbing by 64,000 jobs in November. The unemployment rate is expected to edge down to 4.5 percent from 4.6 percent.

The jobs data could have a significant impact on the outlook for interest rates ahead of the Federal Reserve's next monetary policy meeting later this month.

The Fed is widely expected to leave interest rates at its January 27th-28th meeting but is seen as likely to cut rates by at least another quarter point in the coming months.

Ahead of the monthly jobs report, a report released by the Labor Department this morning showed first-time claims for U.S. unemployment benefits edged up by slightly less than expected in the week ended January 3rd.

The Labor Department said initial jobless claims crept up to 208,000, an increase of 8,000 from the previous week's revised level of 200,000.

Economists had expected jobless claims to rise to 210,000 from the 199,000 originally reported for the previous week.

Sector News

Housing stocks have shown a strong move back to the upside after falling sharply on Wednesday, with the Philadelphia Housing Sector Index surging by 2.7 percent.

A sharp increase by the price of crude oil is also contributing to significant strength among oil service stocks, as reflected by the 1.9 percent jump by the Philadelphia Oil Service Index.

On the other hand, semiconductor, computer hardware and networking stocks have shown significant moves to the downside, contributing to the drop by the tech-heavy Nasdaq.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan's Nikkei 225 Index tumbled by 1.6 percent, while Hong Kong's Hang Seng Index slumped by 1.2 percent.

Meanwhile, the major European markets have moved slightly higher on the day. While the French CAC 40 Index is up by 0.2 percent, the German DAX Index is up by 0.1 percent and the U.K.'s FTSE 100 Index is just above the unchanged line.

In the bond market, treasuries have moved back to the downside amid concerns about the national debt. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 3.7 basis points at 4.175 percent.

Source: TradingView

Institutional investors are signaling their most negative outlook on oil in nearly a decade, driven by a growing global supply glut and shifting geopolitical landscapes. A recent survey from Goldman Sachs reveals that sentiment is hovering just above record lows, painting a bleak picture for crude prices.

Goldman Survey Reveals Near-Record Pessimism

According to a Goldman Sachs survey conducted between January 5-7, a striking 59% of its 1,100 clients are either bearish or slightly bearish on crude oil. This positions current market sentiment near its most pessimistic level in a monthly dataset that tracks investor views back to January 2016.

The only time investors held a slightly more negative view was in April of last year, when President Donald Trump was threatening major tariffs against U.S. trading partners.

Adding to the bearish consensus, the survey also found that a record number of institutional investors now consider oil their favorite short position.

A Deep Dive into the Global Supply Glut

This overwhelmingly negative sentiment follows a challenging year for oil, which saw its worst performance since 2020. The primary cause is a significant oversupply driven by several key factors:

• Increased OPEC+ Production: The producer group raised its output targets.

• Record U.S. Pumping: The United States has been producing oil at record levels.

• New Global Supply: Countries like Brazil and Guyana have significantly boosted their contributions to the market.

While Brent crude, the international benchmark, traded above $61 a barrel on Thursday, it remains substantially down from its levels a year ago.

Geopolitical Factors Could Worsen Oversupply

Market analysts expect the oil glut to expand even further this year, with several geopolitical developments threatening to add more barrels to the market.

A potential end to the war in Ukraine could remove supply disruptions and lift sanctions on Russian crude, releasing more oil globally. Meanwhile, the U.S. is planning to manage future sales of Venezuelan oil, which would bring the nation's crude back to the market. Even a marginal increase in Venezuela's production capacity could contribute to the growing surplus.

How Traders Are Positioning for a Downturn

This bearish outlook is clearly reflected in current trading strategies. According to data from Kpler's Bridgeton Research Group, trend-following commodity trading advisers were 91% short in West Texas Intermediate (WTI), the U.S. benchmark, as of Wednesday. This heavy short positioning underscores the market's conviction that prices have more room to fall.

France and the United Kingdom have reportedly agreed to deploy troops to Ukraine once a ceasefire with Russia is achieved. While similar unconfirmed reports involve Washington, President Trump has not formally approved such a plan.

Moscow would almost certainly reject any such deployment, viewing it as a direct threat from NATO forces operating on its border. This geopolitical tension formed the backdrop of a recent Paris conference hosted by French President Macron. Despite strong rhetoric from European leaders, Ukrainian President Zelenskyy later complained that a finalized agreement on security guarantees remains ambiguous and unconfirmed.

When asked directly about Western security guarantees against a future Russian attack post-truce, Zelenskyy was blunt: "I am asking this very question to all our partners and I have not received a clear, unambiguous answer yet."

Figure 1: Ukrainian President Volodymyr Zelenskyy with European Union officials. Despite public shows of support, Zelenskyy has voiced frustration over the lack of concrete security guarantees.

Mixed Signals From Washington

The messaging from the United States has been particularly inconsistent. Following the summit, President Trump's envoy, Steve Witkoff, claimed "significant progress" had been made.

"We have made significant progress on several critical workstreams, including our bilateral security guarantee framework and a prosperity plan," Witkoff stated on X. "We agree with the Coalition that durable security guarantees and robust prosperity commitments are essential to a lasting peace in the Ukraine."

However, this optimistic tone contrasts with the intentionally vague rhetoric from Washington. This has been a source of ongoing frustration for Zelenskyy, who receives robust verbal commitments from European allies while the U.S. appears to drag its feet. The result is a cycle of bickering among Western partners without any final, signed agreements.

Furthermore, President Trump is unlikely to support any measure that could be perceived as violating his campaign promise of no American "boots on the ground" in Ukraine.

Figure 2: The 'Coalition of the Willing Summit' in Paris, where leaders discussed long-term support for Ukraine. The meeting highlighted the gap between political rhetoric and finalized commitments.

The Growing Pressure for Elections

Adding another layer of complexity, President Trump has been pushing for Zelenskyy to hold elections. The issue is included in a 20-point peace plan developed between Washington and Kyiv.

In response, Ukraine's parliament has approved a cross-party working group to draft legislation for holding elections under martial law. On January 8, the group met for the second time, with the Central Election Commission (CEC) presenting its proposals.

However, Zelenskyy has outlined his own requirements for an election, including a short-term truce to allow for voting. This presents a major obstacle, as Russia would first have to agree. Moscow has consistently resisted short-term ceasefires, pushing instead for a permanent political resolution to end the conflict.

If Zelenskyy continues to test Washington's patience on these issues, he risks losing the very security guarantees he is trying to secure.