Macro Bites – DOE Offers Constellation Up to $5 Billion for Nuclear Power Upgrades

On Tuesday, Iran’s Supreme Leader Mojtaba Khamenei issued a statement reiterating Tehran's strict conditions for ending the war with the U.S. and Israel.  The statement followed a high-level meeting with National Security Chief Mohsen Rezaei, who had recently returned from regional security talks with officials from Saudi Arabia, Turkey, and Pakistan.  Khamenei described the current military standoff as a state of "neither war nor peace," and stated Iran would end the war only on its terms, safeguarding the interests of the Iranian people and the regional "Resistance Front" in Lebanon, Yemen, and Iraq.

EU ambassador to Australia Lawrence Meredith said on Tuesday that the EU expects a wave of investment into the Australian critical minerals sector as it ‌pushes to diversify its supply chain away from China.  Australia and the EU struck a free trade agreement in March after eight years of negotiations, to remove the EU’s 5.5% tariff on critical minerals and remove tariffs on most other goods.  Once both parties sign and ratify that agreement (expected early ’27), Meredith predicted, "It is going to be a game changer.”  In parallel, talks are "very close" for Australia to ​sign an MOU with the European Investment Bank, which would act as the bloc's funding ​vehicle.

On Tuesday, Energy Secretary Chris Wright announced that the DOE’s Office of Energy Dominance Financing has granted Constellation Energy a conditional loan of up to $5B to help finance nuclear power updates and modernization projects at 15 operating reactors spanning eight power stations (incl. Maryland’s Calvert Cliffs and Pennsylvania’s Limerick; as well as Illinois’ Braidwood, Byron, Clinton, Dresden, LaSalle, and Quad Cities).  Wright said the DOE aims to add 1.1 GW of carbon-free nuclear generation capacity—enough to power more than 930,000 homes.

The Reserve Bank of New Zealand unexpectedly kept its Official Cash Rate unchanged at 2.75% at its 10/28 meeting.  The decision came as a major shock to financial markets, which had priced in an 88% probability of a 25bps hike to 3.00%.  We maintain our view that probabilities for the round of global central bank rate hikes feared by many are significantly lower than consensus.

North Korean ties to Russia are well known but Kim Jong-un is not the only Korean leader cozying up to President Putin. The administration of South Korean President Lee Jae-myung has surprised international analysts in recent weeks with a series of moves that signal warming relations with Moscow, including South Korea facilitating the sale of Russian fuel, a new trade route deal using Russia’s Arctic sea lanes and an escalating diplomatic feud with Ukraine.

U.S. national debt just hit a record $40.53T, up $2.5T in past 12 mos.  FOMC rate decision at 2pm.  All eyes on Warsh presser at 2:30pm.  Microsoft (est. $4.72) and Alphabet (est. $3.02) report earnings after close.