• Taiwan’s defence ministry accuses China of endangering aviation safety and engaging in psychological warfare ahead of key elections. Chinese balloons, suspected of spying, have been observed near or over Taiwan, raising concerns about international aviation safety. Taiwan, on high alert for Chinese interference, claims China is exerting military and economic pressure to influence the election. China sees Taiwan as its territory, a claim rejected by Taiwan. The defence ministry deems the balloons a “serious threat” and suggests China is using them for cognitive warfare. Taiwan’s vice president urges voters to defend democracy. The United States., Taiwan’s key supporter, watches tensions with concern. China dismisses accusations, labelling them as election tactics. The use of balloons sends a clear pre-election message from China, according to a Western security source.

• Russia has reportedly used missiles supplied by North Korea for the first time during its invasion of Ukraine, as confirmed by a senior Kyiv official and corroborated by the U.S. White House. The official, Mykhailo Podolyak, stated on social media that Russia had struck Ukraine with North Korean-supplied missiles, describing it as part of a “genocidal war.” The official did not provide evidence for the claim. Earlier, the governor of Kharkiv, a northeastern region in Ukraine, reported missile strikes by Russia that were not of Russian origin. The U.S. cited declassified intelligence, asserting that Russia used short-range ballistic missiles supplied by North Korea. The Kremlin did not respond to the U.S. claim. The aftermath of a Russian air strike in Kharkiv was filmed by Reuters, with experts suggesting the missile remnants resembled North Korean designs. An investigation is underway to determine the origin of the missiles. The U.S. graphic showed KN-23 and KN-25 short-range ballistic missiles with a range of about 900 km. North Korea has been under a UN arms embargo, and South Korea previously suggested that North Korea supplied short-range ballistic missiles to Russia as part of a broader arms deal. Both Russia and North Korea denied such arms deals but pledged to deepen military relations last year.

• As the conflict in Gaza approaches its third month, various parties are discussing post-war plans. Israeli Defense Minister Yoav Gallant envisions Palestinian governance without Hamas, a multinational task force for reconstruction, Egypt playing a significant role, and Israel’s army maintaining security. The United States, represented by Secretary of State Antony Blinken, is seeking a long-term Palestinian-led governance over a reunited West Bank and Gaza. Egypt’s proposal for Hamas and Islamic Jihad to relinquish power for a permanent ceasefire was rejected. Hamas insists on Palestinians determining Gaza’s future, rejecting any relinquishment of power under Israeli threats. Palestinian President Mahmoud Abbas is calling for an immediate end to the war, an international peace conference, and the establishment of a Palestinian state. Abbas suggests reviving the Palestinian Authority through international agreement, implementing reforms, and holding elections. However, Israeli Prime Minister Benjamin Netanyahu opposes the Palestinian Authority ruling Gaza in its current form.

What to watch out for this week

• In the United States, all attention is focused on the upcoming inflation data, providing insights into the Federal Reserve’s monetary policy outlook. Projections suggest a marginal 0.2% increase in consumer prices for December, following a 0.1% gain in November. At the same time, the core rate is expected to have risen by 0.2%, indicating a slight easing from the prior month’s 0.3% increase. On an annual basis, the headline inflation rate is anticipated to rebound to 3.2% from November’s five-month low of 3.1%, while the core rate is likely to ease to 3.9%, reaching the lowest level since May 2021.
• In Europe, retail sales are expected to remain flat in November, following a modest uptick in the preceding month. Positive indicators include anticipated German data showing a recovery in industrial production and an increase in factory orders for November. France is also likely to witness a resurgence in industrial activity after three consecutive months of decline. Additionally, employment data will be released for the Euro Area, Italy, and Switzerland. On the monetary policy front, Poland will make decisions regarding interest rates. Other noteworthy data include the Eurozone’s business survey, Germany’s balance of trade, France’s final inflation figures, Italy’s retail sales and industrial activity, Switzerland’s inflation rate, retail sales, and industrial production, as well as Russia’s Consumer Price Index.
• In the United Kingdom, the Office for National Statistics (ONS) is set to update monthly figures for GDP, manufacturing production, construction output, and foreign trade. Following a 0.3% contraction in October, the British economy is expected to rebound in November.