Biden urges Israel to take caution
This is an audio transcript of the FT News Briefing podcast episode: ‘Biden urges Israel to take caution’
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Marc Filippino
Good morning from the Financial Times. Today is Thursday, October 19th, and this is your FT News Briefing. The US is walking a fine line in the Israel-Hamas war, and Israel’s currency is struggling because of the conflict. Plus, you know how Netflix will ask you if you’re still watching? Well, yesterday’s earnings report said that the answer is yes. Yes, you are. I’m Marc Filippino. And here’s the news you need to start your day.
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Israel will let basic humanitarian aid into Gaza through Egypt. The decision was in response to a request from US president Joe Biden. He was in Israel yesterday and met Prime Minister Benjamin Netanyahu. Biden’s visit came the day after a catastrophic explosion in a Gaza hospital killed hundreds of people. It’s unclear who carried out the attack. Muslim countries blame Israel. Biden put the blame on Palestinian militants, like Israel did. I’m joined now by the FT’s Washington bureau chief, James Politi. Hi, James.
James Politi
Hi, Marc.
Marc Filippino
So what do we know about this deal to let aid into Gaza?
James Politi
Well, we know that President Biden met with the Israeli cabinet yesterday, including Prime Minister Netanyahu.
Joe Biden voice clip
I come to Israel with a single message: You’re not alone. You are not alone.
James Politi
And President Biden made a request that they allow humanitarian aid into Gaza.
Joe Biden voice clip
The people of Gaza need food, water, medicine, shelter.
James Politi
And he said that the Israelis have agreed to that on condition that there be inspections, that it only be directed towards civilians and that it doesn’t go to Hamas in any shape or form. So the US made then sort of the announcement and said that they would be directing $100mn of aid to Gaza and the West Bank.
Joe Biden voice clip
This money will support more than 1mn displaced and conflict-affected Palestinians, including emergency needs in Gaza.
James Politi
So we’re talking about food, medicine, vital necessities, really.
Marc Filippino
James, the big thing going into Biden’s trip to Israel was the hospital explosion that killed hundreds of people on Tuesday. What was the immediate fallout from that strike?
James Politi
Well, the attack and the explosion at the hospital really overshadowed Biden’s trip to Israel. He was supposed to, not only go to Tel Aviv and meet the Israelis, but also go to Amman later in Jordan and meet with Arab leaders. And in the end, that second leg of the trip was cancelled due to the explosion.
Marc Filippino
Yeah. So what does this strike mean for the US’s relationship with the broader Middle East?
James Politi
Well, I think it will raise sort of suspicion of America’s proximity to Israel. It made it harder for Biden to make the case that he was an honest broker in the conflict, and it made it more difficult to prevent an escalation of the conflict. That’s why it was so hard to have the hospital attack occur right on the eve of his visit to the Middle East. Now, the question is going to be, you know, what is the fallout going forward? How does that affect Israel’s likely ground offensive into Gaza? You know, what we heard from Biden yesterday were some kind of words of caution to the Israelis.
Joe Biden voice clip
Justice must be done. But I caution this: while you feel that rage, don’t be consumed by it. After 9/11, we were enraged in the United States. While we saw justice and got justice, we also made mistakes.
James Politi
He asked them to evaluate what the consequences of their actions would be and have some clarity over their objectives. At the same time, he warned, you know, other regional powers, and I think he was really speaking about Iran here, not to intervene in any way on the other side. So I think this is the delicate balancing act that is happening at the moment.
Marc Filippino
James Politi is the FT’s Washington bureau chief. Thanks, James.
James Politi
Thank you so much.
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Marc Filippino
Investors are looking at all this volatility in the Middle East and betting against the Israeli shekel. And that could put the country’s central bank in a pretty tight spot. Mary McDougall, the FT’s bonds and currencies reporter, joins us now. Hi, Mary.
Mary McDougall
Hi, Marc.
Marc Filippino
All right, so what exactly is the shekel up to? How’s it doing?
Mary McDougall
Well, it’s continued to grind weaker over the last week and a half despite the Bank of Israel announcing that it would sell up to $30bn to support the currency when the conflict first broke out. So it’s now trading at Shk4.03 to the dollar, which is its weakest level since 2015. And it’s down about 5 per cent since over the last week and a half.
Marc Filippino
Yeah. So, Mary, why are investors betting against the shekel even though the central bank is trying to prop up the currency?
Mary McDougall
Well, the main reason is that the risk of the war escalating and the costs associated with that. People are saying that the Bank of Israel could also be forced to cut interest rates more than expected to help support the economy, which would weigh on the currency, too. And there has been a big rise, so Deutsche Bank monitors the short positioning. It’s now at the highest level since January 2022. The short positions shot up by more than any other currency over the, over the past week and a half.
Marc Filippino
Wow. So what are the implications of all this on Israel’s economy?
Mary McDougall
Well, the fall in the currency matters for two reasons. One, and the main one is that it pushes up the cost of imported goods. Israel’s an economy that’s very dependent on imports. So the pass-through rate for inflation is quite high. And a weakened currency stokes inflation. The other risk is that this stokes capital flight from international investors.
Marc Filippino
So then what does the Bank of Israel do here? Because it seems like it’s kind of in a rock and a hard place.
Mary McDougall
Yes. So the Bank of Israel, the deputy governor, said that when setting policies, officials would focus on stabilising the currency rather than on stimulating growth. So it meets on Monday next week. Interest rates are currently 4.75 per cent, which is quite a restrictive level. And when the conflict started, markets had expected that it would start cutting, but now they’re thinking the Bank of Israel might keep rates at that level. They’ve also got a lot of reserves to help support the currency. They’ve got $200bn. They’ve said they’d sell up to 30bn. We don’t know yet how much they’ve done, but we might get more guidance on that.
Marc Filippino
Mary McDougall is the FT’s bonds and currencies reporter. Thanks, Mary.
Mary McDougall
Thanks, Marc.
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Marc Filippino
Netflix blew Wall Street forecasts out of the water yesterday. The company said it added 9mn new subscribers in the third quarter. And — sorry to say to anyone who’s already paying a lot for streaming services — it’s going to raise prices in the US, the UK and France. In the US, a basic subscription will be about $2 more, $3 more if you have a premium one. Investors said, yeah, this is all great news. And Netflix’s share price rose nearly 13 per cent in after-hours trading yesterday.
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Sources tell the FT that Beijing might hold up a major US tech deal. The US chipmaker Broadcom has plans to buy the software company VMware for $69bn. Both companies are actually American but do significant business in China. Delaying the deal seems like a bit of a tit-for-tat move. Just a few days ago, the US announced that it was making it tougher for China to access high-performance semiconductors. But both Broadcom and VMware say that they still expect the deal to close by the end of the month.
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You can read more on all of these stories at FT.com for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.
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