Trump announces to takeover Gaza Strip

President Donald Trump said the United States would take over the war-ravaged Gaza Strip and develop it economically after Palestinians are resettled elsewhere. This announcement shattered decades of US policy toward the Israeli-Palestinian conflict.

A question arises, how and under what authority the US can take over and occupy Gaza, a coastal strip 25 miles (45 km) long and at most 6 miles (10 km) wide, with a violent history. Successive US administrations, including Trump in his first term, had avoided deploying US troops there.

Trump unveiled his surprise plan, without providing specifics, at a joint press conference on Tuesday with visiting Israeli Prime Minister Benjamin Netanyahu.

The announcement followed Trump's proposal earlier on Tuesday for the permanent resettlement of the more than two million Palestinians from Gaza to neighboring countries, calling the enclave - where the first phase of a fragile Israel-Hamas ceasefire and hostage release deal is in effect - a "demolition site."

Trump can expect allies and foes alike to strongly oppose any US takeover of Gaza, and his proposal raises questions whether Saudi Arabia would be willing to join a renewed US-brokered push for a historic normalization of relations with US ally Israel.

The US taking a direct stake in Gaza would run counter to longtime policy in Washington and for much of the international community, which has held that Gaza would be part of a future Palestinian state that includes the occupied West Bank.

"The US will take over the Gaza Strip, and we will do a job with it too," Trump told reporters. "We'll own it and be responsible for dismantling all of the dangerous unexploded bombs and other weapons on the site."

"We're going to develop it, create thousands and thousands of jobs, and it'll be something that the entire Middle East can be very proud of," Trump said. "I do see a long-term ownership position and I see it bringing great stability to that part of the Middle East."

Asked who would live there, Trump said it could become a home to "the world's people." Trump touted the narrow strip, where Israel's military assault in response to Hamas' October 07, 2023, cross-border attack has leveled large swaths, as having the potential to be “The Riviera of the Middle East.”

A question arises, how and under what authority the US can take over and occupy Gaza, a coastal strip 25 miles (45 km) long and at most 6 miles (10 km) wide, with a violent history. Successive US administrations, including Trump in his first term, had avoided deploying US troops there.

Several Democratic lawmakers quickly condemned the Republican president's Gaza proposals.

Netanyahu, referred to a few times by Trump by his nickname, “Bibi,” would not be drawn into discussing the proposal in depth other than to praise Trump for trying a new approach.

The Israeli leader, whose military had engaged in more than a year of fierce fighting with Hamas militants in Gaza, said Trump was "thinking outside the box with fresh ideas" and was "showing willingness to puncture conventional thinking."

Netanyahu may have been relieved that Trump, who forged close ties with the Israeli leader during his first term in the White House, did not pressure him publicly to maintain the ceasefire. He faces threats from far-right members of his coalition to topple his government unless he restarts the fighting in Gaza to destroy Iran-backed Hamas.

Some experts have suggested Trump sometimes takes an extreme position internationally to set the parameters for future negotiations. In his first term, Trump at times issued what were seen as over-the-top foreign policy pronouncements, many of which he never implemented.

A UN damage assessment released in January showed that clearing over 50 million tons of rubble left in Gaza in the aftermath of Israel's bombardment could take 21 years and cost up to US$1.2 billion.

 

 

Saudi Arabia: Unwavering stance on Palestine

Saudi Arabia has reaffirmed its unwavering and non-negotiable stance on the establishment of a Palestinian state, emphasizing that its position remains steadfast and is not subject to political bargaining.

In a statement on Wednesday, the Ministry of Foreign Affairs reiterated that the Kingdom's commitment to Palestinian statehood is deeply rooted and unshakable.

"This firm stance was explicitly affirmed by Crown Prince and Prime Minister Mohammed bin Salman during his address at the opening of the first year of the ninth session of the Shoura Council on September 18, 2024. In his speech, the Crown Prince made it clear that Saudi Arabia will not establish diplomatic relations with Israel unless an independent Palestinian state is established, with East Jerusalem as its capital."

The statement further highlighted that the Crown Prince reiterated this position at the Arab-Islamic Summit held in Riyadh on November 11, 2024. During the summit, he emphasized the urgent need to establish a Palestinian state based on the 1967 borders, end Israeli occupation, and mobilize the international community in support of Palestinian rights. He also called on more nations to recognize Palestine and underscored the significance of securing full United Nations membership for the Palestinian state, as reflected in UN General Assembly resolutions.

Saudi Arabia also firmly rejected any actions that undermine Palestinian rights, including Israeli settlement expansion, land annexation, and any attempts to forcibly displace Palestinians from their homeland.

The Kingdom called on the international community to take decisive action to alleviate the dire humanitarian conditions faced by the Palestinian people, who continue to stand resilient in defense of their land and rights.

The Kingdom reiterated that its stance is not open for negotiation or political bargaining. It stressed that a just and lasting peace cannot be achieved without ensuring the Palestinian people receive their full legitimate rights under international resolutions, a position Saudi Arabia has made clear to both the previous and current U.S. administrations.

 

Germany: The Sick Man of Europe

Recent data reveals that growth eluded the German economy for the second consecutive year in 2024. However, these woes run deeper, as the economy has roughly stagnated since 2020. With the country gearing up for federal elections this February, all eyes are on potential policy changes—spoiler alert, they’re likely to be limited. Below is a look at the key challenges facing the German economy and our panelists’ outlook going forward.

Two fundamental pillars of the German economy have been rocked over the past years: Cheap energy prices and easy access to large export markets. In 2019, the country’s electricity prices were among the lowest in the EU, but in 2023 German electricity prices had more than doubled due to Russia’s invasion of Ukraine.

This reversal of fortunes shook the key industrial sector, which is expect to shrink further for the fourth straight year in 2025. Meanwhile, China’s rising share in markets formerly dominated by German firms—such as automobiles—and a likely increase in trade barriers to both the Chinese and US markets threaten external demand. Together, China and the US absorb around 16% of German exports.

Deteriorating infrastructure, lagging digitalization efforts, the government’s collapse… the list of the economy’s domestic woes goes on, but the culprit, it turns out, is the same: The federal debt brake. This measure caps the state’s net borrowing at 0.35% of GDP annually to contain the public-debt-to-GDP ratio.

Though, successful in its primary aim—Germany has the lowest such ratio among G7 countries—it has had the unfortunate side effect of limiting public investment at a time when it’s desperately needed.

Add to that excessive red tape constraining private investment, and the result is crumbling international competitiveness; according to a report by the Institute for Management Development, Germany has dropped nine places to 24th in the global competitiveness rankings in the past two years. Reforms to the debt brake require a two-thirds majority in Parliament, and are opposed by the two front-runners for the February elections. As a result, such reforms are likely a pipedream.

Though Covid-19 was successfully contained in 2021, households were plagued for a prolonged period afterwards by weak consumer sentiment, declining real wages and elevated interest rates. Heading into 2025, real income growth should pick up, which together with further rate cuts by the ECB will support consumer spending. Still, spending growth will be below the Euro average amid rising unemployment and persistent consumer negativity—in part due to lingering political uncertainty.

The Consensus is currently for the economy to post a shallow rebound in 2025 as lower interest rates and inflation drive improvements in private spending and fixed investment, and stronger EU demand fuels a recovery in exports. Still, Germany will again claim the title of the G7’s worst performer this year, held down by protracted malaise in the key industrial sector.

According to ING’s Carsten Brzeski, “The country is still one of the richest economies in the world, but it needs an overhaul to stop its gradual deterioration. Just addressing the main issues will be a challenge. Add to this unfavourable demographics and the impact on healthcare and pension systems and it’s clear that there is no easy way out of the current situation. In the absence of any new policy initiatives after the elections, the German economy looks set for another year of stagnation and possibly even a third consecutive contraction. A sad new record.”

Friedrich Schaper and Sven Jari Stehn, analysts at Goldman Sachs, said, “The early elections therefore provide an opportunity to tackle Germany’s many economic challenges. While some additional fiscal support seems likely, we believe any fiscal expansion is going to be limited in size, focus mostly on investment and support growth meaningfully only from 2026. Decisive structural reforms could boost Germany’s growth prospects—as they did in the early 2000s—but likewise take time to implement, leaving a weak growth outlook for 2025.”

Courtesy: Focuseconomics

 

 

Trump announces to end Ukraine war

US President Donald Trump announced on Friday that his administration has already engaged in "very serious" discussions with Russia regarding the ongoing war in Ukraine, hinting that he and Russian President Vladimir Putin could soon take "significant" steps toward ending the conflict, reports the Saudi Gazette.

“We will be speaking, and I think we will perhaps do something significant,” Trump told reporters in the Oval Office. “We want to end that war. That war would have not started if I was president.”

While Trump did not disclose which members of his administration have been in contact with Russia, he insisted that "talks are already happening."

When asked whether he had personally spoken with Putin, he remained evasive, stating, “I don’t want to say that.”

Since his return to the White House, Trump has been vocal in his criticism of Ukrainian President Volodymyr Zelenskyy, arguing that he should have negotiated with Putin to prevent the war.

In a Fox News interview earlier in January, Trump ridiculed Zelenskyy, stating, “They were brave, but we gave them billions of dollars,” in reference to the extensive US military and economic aid sent to Kyiv.

Putin, for his part, recently praised Trump in an interview with Russian state television, describing him as a "clever and pragmatic man" who prioritizes US interests.

The Russian leader claimed that if Trump had remained in office, the war in Ukraine might have been avoided. “We always had a business-like, pragmatic but also trusting relationship,” Putin remarked.

The Russian president also echoed Trump’s unsubstantiated claims about the 2020 US election, saying that the Ukraine crisis might never have happened had Trump not been "robbed" of victory.

However, multiple courts, federal and local officials, former campaign staffers, and even Trump's former attorney general have all dismissed any claims of election fraud.

Trump has frequently promised a swift resolution to the war if re-elected, while criticizing President Joe Biden’s administration for its financial and military support of Ukraine. His relationship with Putin has been under scrutiny since his 2016 presidential campaign when he publicly called on Russia to release missing emails belonging to his Democratic rival, Hillary Clinton.

Trump has also been criticized for siding with Putin over US intelligence officials regarding Russia’s interference in the 2016 election and has previously described the Russian president as “pretty smart” for his invasion of Ukraine.

Arabs reject displacement of Gazans

Amid rising concerns over the potential forced displacement of Palestinians from Gaza, the six-party Arab ministerial meeting in Cairo reaffirmed its categorical rejection of any such move and emphasized the need for the full implementation of the ceasefire agreement, reports Saudi Gazette.

In a statement issued on Saturday, the ministers reiterated their commitment to working with US President Donald Trump’s administration to achieve a two-state solution, stressing the importance of a sustainable ceasefire that ensures the safe and unimpeded delivery of humanitarian aid to all parts of Gaza.

The meeting also underscored support for ongoing mediation efforts led by Egypt, Qatar, and the United States to ensure the phased execution of the ceasefire agreement and the eventual achievement of full de-escalation.

Ministers called for the removal of all obstacles hindering entry of humanitarian relief, shelter supplies, and essential materials needed for Gaza's recovery and reconstruction.

Additionally, the ministers rejected any attempts to limit the role of the United Nations Relief and Works Agency for Palestine Refugees (UNRWA), stressing the urgent need for a comprehensive reconstruction plan for Gaza.

They urged the international community and the UN Security Council to uphold the two-state solution and dismissed any plans to divide the Gaza Strip, reiterating the necessity of an Israeli withdrawal.

The Saudi Ministry of Foreign Affairs confirmed that the Cairo discussions focused on ensuring the continuation of the ceasefire, strengthening the Palestinian Authority’s governance capabilities, facilitating the safe return of displaced residents to their homes, and increasing humanitarian aid to Gaza.

This high-level meeting came just days after President Trump proposed relocating Palestinians from Gaza to neighboring countries, such as Egypt and Jordan, a suggestion that was swiftly rejected by both nations and met with opposition from various Arab and international actors.

The discussions also followed Israel’s recent decision to ban UNRWA operations in Israel and occupied East Jerusalem as of Thursday, a move that has been widely condemned as having "catastrophic consequences" for Palestinian refugees.

Attending the Cairo meeting were Egyptian Foreign Minister Badr Abdel Aty, Jordanian Foreign Minister Ayman Safadi, Saudi Foreign Minister Prince Faisal bin Farhan, and Qatari Prime Minister and Foreign Minister Sheikh Mohammed bin Abdulrahman Al Thani. Also present were Hussein Al-Sheikh, Secretary-General of the Palestine Liberation Organization (PLO) Executive Committee, and Arab League Secretary-General Ahmed Aboul Gheit.

 

New tariffs on Mexico, Canada, and China

According to Saudi Gazette, US President Donald Trump will impose new tariffs on imports from Mexico, Canada, and China starting Saturday, marking a significant escalation in global trade tensions.

The tariffs will include a 25% duty on Mexican and Canadian imports and a 10% tariff on Chinese goods.

However, Trump stated on Friday that Canadian oil would face a reduced tariff of 10%, set to take effect on February 18.

Trump also signaled potential future tariffs on the European Union, accusing the bloc of unfair treatment toward the United States.

"These are promises made and promises kept by the President," White House Press Secretary Karoline Leavitt said, justifying the Mexico and Canada tariffs as a response to what she described as their role in the distribution of illegal fentanyl in the United States.

The president has frequently cited undocumented migration and trade imbalances with neighboring countries as key reasons for the tariffs.

During his campaign, Trump had threatened to impose tariffs of up to 60% on Chinese goods but has so far held off on immediate action, instead directing his administration to conduct further analysis.

US imports from China have remained flat since 2018, following a series of tariffs imposed during Trump’s first term.

However, concerns are mounting that renewed trade restrictions could trigger a wider trade conflict and drive up costs for American consumers.

In response to the tariffs, Canadian Prime Minister Justin Trudeau warned that Canada would retaliate if the US moves forward with the new levies.

"It's not what we want, but if he moves forward, we will also act," Trudeau said.

Both Canada and Mexico have indicated they will implement countermeasures while also working to reassure Washington that they are addressing US border concerns.

Chinese officials have also urged against protectionist measures, with Vice Premier Ding Xuexiang calling for a "win-win" approach to trade during a speech at the World Economic Forum in Davos. While he did not mention the US by name, his comments underscored China's concerns about a renewed trade war under Trump's presidency.

The new tariffs come as the US relies heavily on imports from Canada, Mexico, and China, which together accounted for 40% of all goods brought into the country last year. If tariffs on Canadian and Mexican oil imports are enforced, they could undermine Trump’s promise to lower the cost of living, potentially raising prices on fuel and consumer goods.

Trump acknowledged on Friday that tariffs could lead to short-term economic disruption, as costs are often passed along to businesses and consumers. 

PSX witnesses 29%WoW decline in daily trading volume

Pakistan Stock Exchange witnessed volatility throughout the week, largely influenced by corporate earnings announcements. During the week, the benchmark KSE-100 index shed 625 points or 0.54% to close at 114,256 points on Friday, January 31, 2025.

Fertilizer stocks weighed heavily on the benchmark index, following FFC’s lower-than-expected profitability. However, this was partially offset by higher-than-expected final dividends by the banks.

The week begun with State Bank of Pakistan (SBP) cutting the policy rate by 100bps to 12% amid a continued disinflationary trend.

Additionally, SBP revised its inflation forecast for FY25 to range between 5.5% to 7.5%, significantly lower than the earlier projections of 11.5% to 13.5%.

The central bank also changed its current account balance forecast to a range of a 0.5% surplus to a 0.5% deficit of GDP in FY25 as against an earlier estimate of a nominal deficit.

Meanwhile, ahead of the IMF review, authorities met another condition by notifying a gas price increase for captive power producers to PKR3,500/ mmbtu.

Market participation dropped to 15-week low, with an average daily traded volume of 498 million shares, down 29%WoW.

Foreign exchange reserves held by SBP declined by US$76 million to US$11.4 billion as of January 24, 2025.

The domestic currency weakened marginally against the greenback to PKR278.95 to a US$.

Major news flow during the week included: 1) Reko Diq deal with Saudi firm nearing finalization, 2) Only 3,651 individuals file taxable income greater than PKR100 million, 3) SBP injects PKR523.7 billion through open market operations, and 4) Weekly SPI inflation eases multi-year low at 0.44%YoY.

Textile Weaving, Automobile Assembler, and Banks were amongst the top performers, while OMCs, Engineering, and Refinery sectors were among the laggards.

Major selling was recorded by Banks and Foreigners with a net sell of US$10.4 million. Companies, Other organizations and Individuals absorbed most of the selling with a net buy of US$10.5 million.

Top performers of the week were: ATLH, NBP, KTML, AKBL, and BAHL, while the laggards included: ISL, SNGP, UNITY, AGP, and KOSM. 

According to AKD Securities, the market is expected to remain positive, with short-term market momentum largely following the upcoming corporate results.

Over the medium term, the KSE-100 index is anticipated to sustain its upward momentum through CY25, primarily driven by the strong profitability of fertilizer companies, higher sustainable RoEs of banks, and improving cash flows of E&Ps and OMCs, benefitting from falling interest rates.