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Biden Taiwan Gaffe, Lagarde Flags Hikes, Broadcom/VMWare - What's Moving Markets

Economy May 23, 2022 06:49AM ET
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© Reuters

By Geoffrey Smith 

Investing.com -- President Joe Biden annoys China by pledging to defend Taiwan with military force. The euro rises and the dollar retreats further as Christine Lagarde all but nails on 50 basis points of rate hikes from the ECB by September. Stocks are set to open higher, with Broadcom's bid for VMware taking the spotlight. Zoom Video reports after the bell. And Ukraine's president urges the first Davos gathering in two years to seize over $500 billion of Russia's foreign assets to pay for his country's reconstruction. Here's what you need to know in financial markets on Monday, 23rd May.

1. Biden's gaffe on Taiwan angers Beijing

U.S. President Joe Biden said the U.S. military would intervene to defend Taiwan in the event of an attack from mainland China.

“Yes - it’s a commitment we made,” Biden told a press conference during a visit to Japan, adding that unilateral attempts by Beijing to retake the island would result in a situation similar to that in Ukraine.  

White House officials subsequently walked back the comments, saying the U.S.’s policy toward Taiwan “hasn’t changed” and that it stuck by its existing ‘One China’ policy.

However, that wasn’t enough for Chinese officials, who said Biden was “playing with fire.” Foreign Minister Wang Yi warned that: “No one should underestimate the strong determination, firm will, and powerful capabilities of the Chinese people.”

2. Lagarde flags summer rate hikes, bashes crypto

European Central Bank President Christine Lagarde all but pre-announced a half-point rise in the ECB’s key rates, saying in a blog post that it’s “very likely” the ECB will end its negative rate policy by the end of the third quarter. She also implied the ECB would announce at its June meeting an end to net asset purchases as of the start of July.

The euro rose to its highest in three weeks on the announcement, forcing the dollar into a deeper retracement of the gains it made when the U.S. appeared to be the only major advanced economy to be tightening monetary policy.

Lagarde repeated the ECB’s caution about choking off a recovery already under strain from high energy prices and the broader instability caused by Russia’s war in Ukraine. She had some relief on the economic outlook as business confidence in the Eurozone’s largest economy, Germany, improved surprisingly sharply in May.

Lagarde had also made waves on Sunday with an interview saying that she thought cryptocurrency was “worthless”, “based on nothing” and needed tighter regulation.

3. Stocks set to open higher after seven weeks of losses

U.S. stock markets are set to open higher later, giving President the benefit of the doubt that he didn’t mean to dramatically escalate tensions with China.

Biden had told the same press conference that he is considering lifting some of the tariffs imposed on Chinese exports by his predecessor Donald Trump.

By 6:20 AM ET, Dow Jones futures were up 189 points, or 0.6%, while the S&P 500 futures contract was up 0.7% and Nasdaq 100 futures were up 0.5%. The three major cash indices had all lost between 2.5% and 3% last week, their seventh straight week of losses.

Stocks likely to be in focus later include chipmaker Broadcom (NASDAQ:AVGO) and cloud services provider VMware (NYSE:VMW), which reportedly may announce a merger agreement as early as this morning. Zoom Video heads a thin earnings roster after the close.

4. Zelensky urges Davos to seize Russian assets to pay for Ukraine's reconstruction

The World Economic Forum is back after a two-year hiatus. The snow may have disappeared from Davos – as have the Russians – but there is still no shortage of the Great and Good finding their ways on private jets to the luxury resort to preach to the rest of the world about climate change and social exclusion.

The forum opened on a solemn note, however, with Ukrainian President Volodymyr Zelensky (speaking via video link) urging the audience to consider seizing $500 billion of Russian assets held overseas to pay for Ukraine’s reconstruction.

He noted that “only diplomacy” can end the current war – a subtle shift away from the harsher rhetoric he has used about the need to expel Russian forces from Ukrainian territory. That may or may not be related to the surrender of Ukraine’s last soldiers defending Mariupol, which has freed up thousands of Russian troops for other parts of their offensive.

5. Oil pushes higher as Saudi stands by beleaguered new friend

Crude oil prices pushed higher after Saudi Arabia’s oil minister Prince Abdulaziz stood firmly by the so-called OPEC+ production agreement, resisting pressure from its traditional allies in the West to isolate Russia.

OPEC has stuck by its practice of fixing monthly production quotas despite the increasing evidence that Russia is unable to increase its output, due to western sanctions. That and problems in other exporting nations had led to OPEC+ undershooting its production target by over 2 million barrels a day in April.

By 6:40 AM ET, U.S. crude futures were up 1.1% at $111.44 a barrel, while Brent crude was up 1.1% at $111.17 a barrel.

 
 
 
Biden Taiwan Gaffe, Lagarde Flags Hikes, Broadcom/VMWare - What's Moving Markets
 

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Comments (17)
Nils Hullmann
Nils Hullmann May 23, 2022 1:22PM ET
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let's hope he does soon
Junk Man
Junk_Man May 23, 2022 1:07PM ET
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Taiwan has been an independent country for over 100 years…. Independent military, government, currency, etc.
Mark Jannetty
Mark Jannetty May 23, 2022 12:14PM ET
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someone needs to lock him back in the basement.
Mojo Snake
Mojo Snake May 23, 2022 11:38AM ET
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Welcome to another weekly episode of "That's Our Brandon"
Tre Hsi
Tre Hsi May 23, 2022 11:38AM ET
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yeah let's bring Trump back, because there was nothing but calm and professionalism during his first presidency
Brad Albright
Brad Albright May 23, 2022 11:38AM ET
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Tre Hsi Yes, and he was a great example for children too!
Mojo Snake
Mojo Snake May 23, 2022 11:38AM ET
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Let's see no Russian aggression, oil independent US, low inflation, China in check and paying full tariffs, thousands of people staying on their side of the Border not flooding the country, oh but you're right those Mean Tweets really did affect our lives so deeply.
Mojo Snake
Mojo Snake May 23, 2022 11:38AM ET
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Brad Albright  Oh NO not the children, Well you mean the ones who were allowed to be born right???  Just checking
Brad Albright
Brad Albright May 23, 2022 11:07AM ET
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Biden tells it like it is. He reminds me of Ronald Regan.
Mojo Snake
Mojo Snake May 23, 2022 11:07AM ET
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I just threw up a little in my mourth from your comment.  Thanks for that....
Dennis Wozny
Dennis Wozny May 23, 2022 9:30AM ET
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Biden is a fool
First Last
First Last May 23, 2022 9:30AM ET
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But still less of a fool than the last potus.
Junk Man
Junk_Man May 23, 2022 9:30AM ET
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First Last niw your splitting hairs
Marco cuevas
Marco cuevas May 23, 2022 9:26AM ET
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I don't know why you guys fight about politics and align yourselves with weak ,Men that includes both parties especially trump?..you all need to be more resilient in this world and not be weak like your idols....besides this country is not run by politics it is run by 3 entitoes...BIG BANKS, BIG PHARMA/HEALTH, AND BIG OIL.
Matt Kay
Matt Kay May 23, 2022 9:17AM ET
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Time to create more political parties in the US. reps and dems are full of corrupt boomers who do nothing for the working man. US is a sad country =/
Matthew Petyk
Matthew Petyk May 23, 2022 8:50AM ET
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So. the president saying that America will stand by its ally and honor its commitment to back them up in a fight is a "Gaffe"? After the Afghanistan disaster, America needs more strength and commitment not less.
Warren Wesley
Warren Wesley May 23, 2022 8:50AM ET
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white house walked the comment back
Simon Liu
Simon Liu May 23, 2022 8:44AM ET
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Taiwan has always been part of China, like California to USA, while Ukraine has never been part of Russia, like Mexico and USA.There will not be war between Taiwan and China. Biden is saying this because he is fully clear the WAR will be directly between USA and China, if USA really wants it.
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Jurgen Daub
Jurgen Daub May 23, 2022 8:44AM ET
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well, being so, Mexico should claim it.
Tre Hsi
Tre Hsi May 23, 2022 8:44AM ET
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Jurgen Daub   well if you believe FoxNews and the bogus race replacement theory it tries to peddle, it would seem Mexico is reclaiming it
First Last
First Last May 23, 2022 8:44AM ET
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"Taiwan has always been part of China" --  False.  The Qing Dynasty, the last dynasty, annexed Taiwan in 1683.
Tre Hsi
Tre Hsi May 23, 2022 8:44AM ET
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First Last  before that it was a territory populated by indigenous tribes similar to polynesians, and then a dutch colony
Brad Albright
Brad Albright May 23, 2022 8:44AM ET
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Tre Hsi Please don't confuse the know-nothings with pesky facts.
 
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