Wall Street Breakfast: Deeper Ties
Saudi Arabia is rolling out the red carpet for Chinese President Xi Jinping, who has arrived in the country for a four-day visit. Xi's plane was escorted by Saudi fighter jets on the way into Riyadh, while he was greeted at the airport by the capital's governor and the Saudi foreign minister. It's a stark contrast to when President Biden visited the country in July after previously pledging to make a "pariah" out of the Kingdom over the killing of U.S.-based columnist Jamal Khashoggi (and considered a return to the JCPOA with archrival Iran).
Bigger picture: After much debate within the administration, Biden eventually decided to visit the Saudis amid an energy crisis at home and a need to reassert American leadership in the region. Beijing is viewing the trip through much of the same lens as it expands its sphere of influence. For Saudi Arabia, China has heavily outpaced the U.S. as its largest trading partner since 2016, and while the Kingdom has historically relied on American military aid under "oil for security" policies, the times may be changing. The U.S. shale industry has eliminated the need for a lot of Middle East oil, while China has subsequently become the Saudi's top crude customer.
"We are mindful of the influence that China is trying to grow around the world," noted John Kirby, a spokesman for the U.S. National Security Council. "The Middle East is certainly one of those regions where they want to deepen their level of influence."
Economically speaking: Some $30B worth of agreements are expected to be signed, including energy and infrastructure deals, and sectors that could benefit from U.S.-blacklisted firms like telecoms equipment giant Huawei Technologies. The two sides are also expected to coordinate China's Belt and Road Initiative with Saudi Arabia's Vision 2030 development plan, while talks on a free trade agreement between China and the Gulf Cooperation Council are entering their final stage. (9 comments)
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We want to offer you a chance to experience Premium for a full year, so you can see if it's a good fit for you.#NYTStrike More than 1,100 New York Times (NYT) newsroom workers and staffers are set to walk out today in a historic one-day strike following the breakdown of talks between the workers' union and the company. Negotiations between the two sides have gone on for some time, but frustration at the union - The NewsGuild of New York - has grown over the lack of progress since its last contract with the paper expired in March 2021. It's a notable strike as the last industrial action to hit the NYT occurred some 40 years ago.
Quote: "Today we were ready to work for as long as it took to reach a fair deal, but management walked away from the table with five hours to go," the Guild said. "It’s official: @NYTimesGuild members are walking out for 24 hours on Thursday."
Dozens of bargaining sessions have been held since the March 2021 expiration, but the two sides have failed to come to an agreement on "salaries, health and retirement benefits, and other issues." Compensation is where they may be furthest apart, with the news organization offering union members a 5.5% raise upon ratification of the contract, 3% raises in 2023 and 2024, and a 4% retroactive bonus to compensate for a lack of raises since the contract expired. The union has proposed a 10% raise upon ratification, 5.5% raises in 2023 and 2024, and an 8.5% retroactive bonus.
Response: "It is disappointing that they are taking such an extreme action when we are not at an impasse,” NYT spokesperson Danielle Rhoades Ha declared. "Strikes typically happen when talks deadlock. That is not where we are today," added Joe Kahn, executive editor of The Times. "While the company and the NewsGuild remain apart on a number of issues, we continue to trade proposals and make progress toward an agreement." (5 comments) Defense Replacing the JEDI
The Pentagon has finally made a decision about upgrading its cloud infrastructure following years of delays, legal challenges and shifting priorities. Amazon Web Services (AMZN), Google (GOOG, GOOGL), Microsoft (MSFT) and Oracle (ORCL) will each get a piece of the Joint Warfighting Cloud Capability contract, which has a shared ceiling of $9B. The competition was intense to scoop up a share of the JWCC deal, which will be awarded in parts and has a total estimated completion date of June 2028.
Backdrop: The Joint Warfighting Cloud Capability succeeds an earlier contract known as the Joint Enterprise Defense Infrastructure - better known in the industry as JEDI - that sought to build a large common cloud for the entire Defense Department. Amazon Web Services was considered the frontrunner for JEDI before the DoD handed it to Microsoft in October 2018, but AWS didn't back down. The company alleged in a lawsuit that the award was tainted by then President Trump's animus against Jeff Bezos and related litigation threatened to delay the deal for years.
There was also a slew of objections from Oracle and Congress, prompting the Pentagon to acknowledge that advances in cloud computing and the time frame of the contract could render the scheme obsolete. The DoD eventually pulled JEDI in favor of the expanded JWCC, while seeking proposals from additional companies. JWCC is intended to offer access to unclassified, secret and top-secret data to military personnel worldwide, and serve as a backbone for modern war operations.
Outlook: Splitting the contract among several vendors is similar to how things are increasingly being done in the private sector. The multi-cloud strategy won't concentrate the program under one provider, which would have sole responsibility for hosting some of the military's most sensitive data, as well as preventing service disruptions and outages. (21 comments)
Ahead of the curve? Following a deadly crash in Arizona and dwindling R&D funding, Uber gave up its standalone autonomous ambitions in 2020 by selling its self-driving subsidiary to Aurora Technologies. While Uber still holds a stake in the car tech startup, and CEO Dara Khosrowshahi sits on its board, the company is feeling pressure to invest in an industry which its founder once hailed as critical to the future of the firm. In September, Uber inked a 10-year agreement with Nuro on autonomous food delivery, but it's now looking to get back into the robotaxi game as the technology gradually progresses.
"Autonomous vehicles are still a reality we can expect but it's not going to happen overnight," said Noah Zych, global head of autonomous mobility and delivery at Uber. "The way we look at it at Uber, it's going to be a hybrid network with a mix of driverless cars and human drivers, for a very, very long time."
Go deeper: New labor rules are threatening Uber's current business model, which relies heavily on independent contractors, by classifying its gig drivers as employees. The new partnership with Motional hopes to form one of the largest autonomous vehicle networks, with the potential of reaching millions of riders. Today's Markets In Asia, Japan -0.4%. Hong Kong +3.4%. China -0.1%. India +0.3%.
In Europe, at midday, London -0.1%. Paris +0.1%. Frankfurt -0.1%.
Futures at 6:30, Dow flat. S&P +0.1%. Nasdaq +0.2%. Crude +1.1% to $72.81. Gold -0.2% to $1794.50. Bitcoin +0.1% to $16,806.
Ten-year Treasury Yield +4 bps to 3.45% Today's Economic Calendar 8:30 Initial Jobless Claims
10:00 Quarterly Services Report
10:30 EIA Natural Gas Inventory
4:30 PM Fed Balance Sheet
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