China Unexpectedly Cuts Interest Rate as Global Tech Stocks Tumble

China’s central bank cut a benchmark interest rate for one-year loans to commercial banks today, reflecting concern about the country’s weakening economy after a previous round of rate cuts earlier this week. The announcement came as several tech stocks fell in value on exchanges around the world. Yesterday, U.S. stock index NASDAQ saw its biggest one-day drop since 2022 amid the tech selloff.

Both China’s moves and the tech selloff underscore vulnerabilities in the global economy. China’s growth came in worse than expected in the second quarter of the year, and its central bank’s move today was the largest cut in that particular interest rate since the early days of the COVID-19 pandemic. The United States, meanwhile, reported higher-than-expected growth in the second quarter this morning. The U.S. economy expanded at a 2.8 percent annualized rate, the Bureau of Economic Analysis said. (NYT, FT, Bloomberg)

Analysis

“The sharp [stock market] declines mark a reversal of the frenzy around tech stocks—and those associated with artificial intelligence in particular,” the Financial Times’ Song Jung-a, Leo Lewis, and George Steer write.

“There is a problem with the assumption that deglobalization is a fact on the ground: the data does not fully back it up,” CFR expert Brad Setser writes for Foreign Affairs. “If observers downplay the extent to which the world’s economies are still integrated, they will underestimate the cost of actions that would fracture the world economy.”

Middle East and North Africa

Syria’s Assad Meets With Putin in Moscow

Russian President Vladimir Putin met with Syrian President Bashar al-Assad yesterday in Moscow, signaling interest in mediating tensions between Syria and Turkey, the Kremlin said. Also discussed were events “in the Eurasian region,” Assad said. Syria and Turkey cut ties in 2011 after Turkey backed Syrian insurgent groups seeking to overthrow the Assad regime. Russia is one of Assad’s closest backers in Syria’s ongoing civil war. (AP)

Israel: Prime Minister Benjamin Netanyahu, in his address to the U.S. Congress yesterday, said Israel “will not relent” in its military campaign against Hamas in Gaza. He said his postwar vision for the territory was of a “demilitarized and deradicalized Gaza” led by a civilian government of Palestinians who do not seek to destroy Israel. He is scheduled to make a visit to the White House today. (Times of Israel, AP)

This Expert Brief by Senior Fellow Bruce Hoffman discusses the threat that Hamas still poses to Israel.

Pacific Rim

Number of Foreign Residents in Japan Reaches All-Time High

Some 3.3 million foreign residents live in Japan as of January 1, the highest number since records began in 2013, the government said yesterday. Japan has doubled the cap on its skilled worker visa and introduced a digital nomad visa to attract foreign labor as its domestic-born population shrinks. (Nikkei)

South and Central Asia

Myanmar Rebels Report Seizure of Military Facility Near Border With China

The Myanmar National Democratic Alliance Army, one of the country's armed rebel groups, said it took control of a major regional military headquarters near the border with China today. A spokesperson for the ruling military junta did not immediately comment. Fighting in the area has escalated after recent cease-fire talks brokered by China fell through. (Reuters)

For the Asia Unbound blog, CFR expert Joshua Kurlantzick discusses whether 2024 will see the end of Myanmar’s junta.

India/UK: David Lammy made his first trip to India as United Kingdom (UK) foreign minister yesterday, where he signed a commitment to cooperate on technology to boost economic growth in both countries. The two sides also discussed ongoing negotiations regarding a potential free trade deal, India’s external affairs ministry said. (Hindustan Times)

Sub-Saharan Africa

Eritrea Moves to Suspend Flights by Ethiopian Airlines

Ethiopian Airlines said it was seeking clarification after receiving a notice that the Eritrean government would suspend its flights due to luggage theft and other “irregularities.” The suspensions are set to take effect on September 30. The airline has been flying to Eritrea since 2018 after a previous suspension during the countries’ war. (Addis Standard)

Kenya: President William Ruto named four opposition figures to his cabinet in a leadership shakeup prompted by mass antigovernment protests. The opposition now controls the influential energy and finance ministries. (BBC)

Europe

Germany, UK Up Military Cooperation

The two countries’ defense ministers signed a cooperation deal yesterday, committing to increasing coordination in defense industrial sectors. The new steps include standardizing weapons systems and ammunition. Germany and the UK are Europe’s top two donors of military aid to Ukraine; the deal comes as concern grows that the United States may not continue to support Ukraine if former U.S. President Donald Trump is reelected. (Politico)

Russia/Brussels: European Union (EU) member countries discussed options for extending sanctions on Russian central bank assets in order to continue to use their profits to underpin a loan for Ukraine, according to documents seen by Reuters. While EU regulations call for such sanctions to be renewed every six months, officials floated the possibility of an “open-ended” extension of the sanctions regime. (Reuters)

Americas

Brazil Cancels Election Observation Mission to Venezuela

Brazil’s top electoral court said it will no longer send observers to Venezuela’s Sunday election after “false statements” were made against Brazilian electronic voting machines. Brazil’s statement did not mention Venezuelan President Nicolás Maduro by name, though Maduro said on Tuesday that Venezuela’s voting system was more trustworthy than Brazil’s. The cancellation reduces the number of foreign experts on the ground during the vote. (Bloomberg)

For the Latin America’s Moment blog, CFR expert Will Freeman discusses how Maduro could fumble the election.

Canada: Wildfires caused “significant loss” in the town of Jasper, Alberta, from which twenty-five thousand people were evacuated earlier this week, officials said. No loss of life was reported after the blazes, though they consumed several buildings. (CBC, BBC)

U.S. Campaign 2024

Biden Says He Withdrew From Race to ‘Pass the Torch to a New Generation’

In an Oval Office address yesterday, President Joe Biden said he decided to drop out of the 2024 presidential race because “nothing can come in the way of saving our democracy. That includes personal ambition.” He added that for the presidential race, “the best way forward is to pass the torch to a new generation” and that he would focus the remainder of his term on policy goals such as Supreme Court reform, lowering drug costs, and working to end the war in Gaza and bring home detained Americans. (NYT)

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