Trump's Plan to 'Nationalize' Elections Draws Fire

NATO confirmed on Tuesday that it is planning a new mission in the Arctic, a move that comes just weeks after U.S. President Donald Trump created friction within the alliance by insisting the U.S. needed to control Greenland. Trump cited unverified security threats from Russia and China as justification for his stance.

NATO forces conduct a training exercise near the Arctic Circle.

"Arctic Sentry": What We Know So Far

Martin O'Donnell, a spokesperson for NATO's Supreme Headquarters Allied Powers Europe, announced that a "NATO enhanced vigilance activity" is being developed to "further strengthen NATO's posture in the Arctic and High North." As planning has just begun, he did not provide additional details.

The location for the exercises remains unclear. This initiative is separate from the ongoing NATO exercise in Greenland, "Operation Arctic Endurance," which is currently led by Denmark.

Germany's Spiegel newsmagazine first reported on the plans, revealing that NATO's commander, U.S. General Alexus G. Grynkewich, had ordered the development of a mission titled "Arctic Sentry." According to the report, NATO defense ministers may convene in Brussels in the coming weeks to discuss the preliminary operation plans.

The Trump Factor: Greenland in the Spotlight

The push for a stronger NATO presence follows a period of diplomatic strain. In the lead-up to the World Economic Forum in Davos last month, President Trump suggested he might use force to acquire Greenland, a strategically valuable Arctic island.

The White House did not retract these claims, with the president later repeating his assertion that the U.S. would "have" Greenland "one way or the other."

The statements put Washington's European allies in a difficult position, forcing them to balance their support for Denmark's sovereignty over Greenland with the need to avoid further antagonizing Trump and risking the integrity of the defense alliance.

Diplomatic Fallout and Ongoing Talks

Tensions appeared to ease after Trump met with NATO Secretary General Mark Rutte at Davos. Following the meeting, Trump announced he had secured a "framework" deal to protect U.S. interests and seemed to back away from his threats of force.

Rutte confirmed he had discussed with Trump how NATO allies could work together to ensure Arctic security. However, the specific details of the deal mentioned by Trump have not been made public.

Despite the apparent de-escalation, Greenland remains cautious. On Monday, Prime Minister Jens-Frederik Nielsen warned that the U.S. is still pursuing "paths to ownership and control over Greenland."

Last week, senior officials from the U.S., Denmark, and Greenland initiated diplomatic talks. According to Denmark's foreign ministry, the discussions aim to "address American concerns about security in the Arctic while respecting the Kingdom's red lines."

Source: Yahoo Finance

Prices rose as much as 4.9% to $13,526 a ton on the London Metal Exchange, following an 11% plunge from a record high last Thursday to Monday’s close. Other base metals also climbed on the LME, while gold and silver rallied sharply.

Source: Bloomberg

Nvidia CEO Jensen Huang discusses the future of technology and AI at the World Economic Forum in Davos.

Nvidia CEO Jensen Huang has reaffirmed the company's plan to invest in OpenAI, directly pushing back on recent reports suggesting the landmark deal was in jeopardy.

"There's no drama involved. Everything's on track," Huang stated in a Tuesday interview with CNBC's Jim Cramer. His comments came as Nvidia's stock fell over 3.4% amid a wider tech sell-off, with shares now trading 13% below their October peak.

The $100 Billion AI Deal Under Scrutiny

The partnership first made headlines in September when Huang and OpenAI CEO Sam Altman announced a letter of intent. The plan outlined a staggering investment of up to $100 billion from Nvidia into the AI research lab, which would use the funds to build out AI infrastructure powered by Nvidia technology and requiring up to 10 gigawatts of power.

However, doubts began to surface. An SEC filing in November revealed the deal had not been finalized. The speculation intensified over the past weekend after a Wall Street Journal report claimed the agreement was "on ice."

Huang's Commitment to Future Funding

In his latest remarks, Huang sought to end the uncertainty by confirming Nvidia's participation in OpenAI's next fundraising round, which he described as potentially the "largest private round ever raised in history."

Last month, reports indicated that OpenAI was in discussions for a new funding round that could raise as much as $100 billion.

"We will invest in the next round," Huang said unequivocally. "There is no question about that." He also noted that Nvidia would be open to investing in subsequent rounds and would want to participate if OpenAI pursues an eventual IPO.

Navigating a Shifting Chip Landscape

The relationship between the two tech giants is foundational, as OpenAI has historically relied on Nvidia's graphics processing units (GPUs) to train and run its powerful AI models like ChatGPT.

Yet, recent commentary from Sam Altman has highlighted a critical bottleneck: a shortage of AI chips. Altman has stated that OpenAI could generate significantly more revenue if it had greater access to computing power. In response, OpenAI has started to diversify its supply chain, striking deals with Nvidia's competitors, including Advanced Micro Devices, Broadcom, and Cerebras.

Despite these moves, Altman publicly dismissed any notion of a rift. In a post on X on Monday, he clarified his company's position.

"We love working with NVIDIA and they make the best AI chips in the world," Altman wrote. "We hope to be a gigantic customer for a very long time. I don't get where all this insanity is coming from."

Tech stocks got a boost after Palantir's (PLTR) surprisingly strong quarterly results signaled the AI trade has room to run, though the index's momentum has now flipped. Revenue at the data analytics firm surged, driven by demand for its AI platform, and its sales outlook topped estimates.

Source: Reuters

Investors are positioning for a major shift in the bond market, betting on higher long-term Treasury yields and a steeper yield curve. The catalyst is the expected appointment of Kevin Warsh as the next Chair of the Federal Reserve, who is anticipated to pursue rate cuts while simultaneously shrinking the central bank's massive balance sheet.

This unique policy combination is forcing a market repricing, as the two actions pull financial conditions in opposite directions.

The Warsh Doctrine: Rate Cuts Meet Balance Sheet Cuts

Warsh’s expected strategy hinges on two key pillars. First is his preference for a significantly smaller Fed balance sheet, which currently stands at roughly $6.59 trillion. Reducing it means the Fed would buy fewer Treasuries, effectively withdrawing a major source of demand from the market.

When the Fed steps back, more government debt supply must be absorbed by private investors. This typically pushes long-term yields higher to attract buyers, leading to a steeper yield curve.

"The main outcome of shrinking the balance sheet would be to have a yield curve that is more normally positively sloped as it was historically before all the intervention following the financial crisis," said Eric Kuby, chief investment officer at North Star Investment Management Corp.

At the same time, Warsh is expected to keep short-term rates low. Despite a reputation as a hawk during his time as a Fed governor from 2006 to 2011, he has recently adopted a more dovish stance, aligning with President Donald Trump's calls for rate cuts. This mix of low short-term rates and high long-term rates is the classic recipe for a steepening yield curve.

Reading the Market: Treasury Yields and Inflation Fears

The bond market was already moving in this direction even before Warsh's nomination. A steepening yield curve—where the gap between long- and short-term rates widens—was being driven by concerns over inflation and rising fiscal deficits, which signal more government debt issuance ahead.

The spread between 2-year and 10-year Treasury yields recently hit 72.70 basis points, its widest level since April 9. This reflects growing investor concern about the long-term economic outlook. Higher long-term yields have a direct impact on the economy, making everything from mortgages to corporate bonds more expensive.

Warsh has argued that productivity gains from artificial intelligence are disinflationary, giving the Fed room to ease monetary policy. U.S. rate futures markets seem to agree, pricing in expectations for about two quarter-point rate cuts this year, with the first potentially coming at the June 16-17 meeting.

A Contradictory Policy Mix?

While the market is pricing in this outcome, analysts point to a fundamental tension in Warsh's potential approach. Cutting interest rates is a tool to ease financial conditions, while shrinking the balance sheet is a form of tightening. Executing both at once is a complex balancing act.

"It's a tough policy to administer," said Jim Barnes, director of fixed income at Bryn Mawr Trust. "You have one policy that you're using in a dovish fashion like cutting rates, and then you have another policy that you're using that leads to higher rates, like shrinking the balance sheet."

The core challenge is that if the balance sheet shrinks and long-term rates rise, the term premium—the extra yield investors demand for holding longer-term bonds—could also increase. This would counteract the Fed's efforts to ease financial conditions through rate cuts.

"They're going in opposite directions," Barnes added. "You want to cut rates and shrink the balance sheet at the same time. But how do you put that into action? And that's where it becomes problematic."

Volatility on the Horizon

The road ahead is filled with uncertainty. Lou Crandall, chief economist at Wrightson-ICAP, noted that any plan to reduce the Fed's assets involves complex technical issues, particularly around bank liquidity regulations.

Market participants also anticipate a rise in interest rate volatility. Oscar Munoz, chief U.S. macro strategist at TD Securities, described Warsh as a potentially contentious Fed chief due to his past criticism of the central bank. Munoz highlighted Warsh's "notable 180-degree shift in policy priorities" from his previously hawkish stance during the Global Financial Crisis.

Many bond market veterans suspect Warsh may eventually revert to his hawkish instincts, which would further fuel rate volatility. The MOVE index, a key measure of bond market volatility, has been declining for months and has yet to price in the potential disruption from a new Fed chair.

Ultimately, the market is left to wonder about Warsh's true intentions. "He's changed his tune recently, and a cynic may say only to secure the nomination," said Benjamin Connard, portfolio manager at Carnegie Investment Counsel. "Rates are set by the majority, so Warsh alone cannot cut them."