European Midday Briefing : Focus Shifts to Central -2-

Israel Strikes Iran Amid International Push to Contain Tehran

Israel carried out a drone strike targeting a defense compound in Iran, as the U.S. and Israel look for new ways to contain Tehran's nuclear and military ambitions, according to U.S. officials and people familiar with the operation.

Iranian officials said that the country's air defenses had fended off an attempted attack by three small quadcopters targeting a munitions factory in the city of Isfahan, right next to a site belonging to the Iran Space Research Center, which has been sanctioned by the U.S. for its work on Iran's ballistic-missile program.

GLOBAL NEWS

Banks Brace for More Consumers to Fall Behind on Their Loans

U.S. banks dusted off their recession-ready playbooks at the end of 2022.

Regional lenders and banks with big credit-card businesses continued to profit from borrowers who ran up credit balances at higher interest rates in the fourth quarter. But many tightened their lending standards and set aside more money to cover potential loan losses, signs that they don't expect the good times to last.

How Quickly Rate Increases Slow the Economy Could Shape 2023 Fed Policy

Federal Reserve officials' deliberations this week over how much more to raise interest rates will hinge on how much they expect the economy to slow this year.

Key to those discussions at their two-day policy meeting will be estimating how much their previous rate increases will cool growth and inflation over time, or what Nobel Laureate Milton Friedman called the "long and variable" lags of monetary policy.

Investors Who Bet on Bitcoin Fund in Retirement Accounts Pay the Price

For many years, individual investors used the Grayscale Bitcoin Trust as a way to bet on bitcoin in their retirement accounts. Now they are paying the price.

The $14.6 billion trust, known by its ticker GBTC, was one of the few options for individual investors to get exposure to bitcoin without having to purchase the cryptocurrency directly.

Short Sellers Feel the Pain in Stock Market's 2023 Rally

The market's comeback in 2023 has been very bad news for one group: short sellers.

Short sellers profit from stock declines by borrowing shares of companies that they believe are overvalued, selling them, and then buying them back at a lower price later. They made huge gains in 2022, when markets around the world tumbled.

Fed Debates Whether Wages or Low Unemployment Will Drive Inflation

Stubbornly high inflation is finally easing as supply chain disruptions fade and interest rates at 15-year highs put the brakes on demand. Now, Federal Reserve officials have voiced unease that prices could reaccelerate because labor markets are so tight.

At issue is what's the right way to forecast inflation: a bottoms-up analysis of recent readings on prices and wages that puts more weight on pandemic-driven idiosyncrasies-or a traditional top-down analysis of how far the economy is operating above or below its normal capacity.

Startup Valuation Resets to Kick-Start Stalled M&A

The merger-and-acquisition market for venture-backed startups is expected to see a rebound in deal making this year as entrepreneurs and their investors resign themselves to accepting lower prices for their companies.

Startups flush with capital from the recent bull market in venture funding have been holding out for better prices for months, despite calls for discounts from prospective buyers anticipating a souring economy. Many startups, however, may soon give in if they continue struggling to raise capital and face lower private-market valuations.

Sharing Biden, Trump Documents Could Complicate Investigations, DOJ Says

WASHINGTON-The Justice Department told top Senate Intelligence Committee lawmakers that providing nonpublic information to the panel about the classified material that ended up in the personal possession of two presidents could complicate the ongoing investigations into the incidents.

Members of the committee from both parties have been pressing the Biden administration to turn over the classified documents found at President Biden's private home and former office and former President Donald Trump's residence. Intelligence officials have so far declined to do so, citing the appointment of special counsels who are looking into the discoveries of the documents.

House Speaker Kevin McCarthy to Meet With Biden, Expected to Discuss Debt Ceiling

President Biden and House Speaker Kevin McCarthy plan to meet at the White House on Wednesday as Republican lawmakers push to tie spending cuts to an increase in the debt ceiling.

Mr. McCarthy, who unveiled the timing of the previously announced meeting in an interview Sunday on CBS's "Face the Nation," said lawmakers should implement a plan to cut spending and lower the country's future debt load and not simply raise the existing $31.4 trillion borrowing limit.

China's Top Nuclear-Weapons Lab Used American Computer Chips Decades After Ban

SINGAPORE-China's top nuclear-weapons research institute has bought sophisticated U.S. computer chips at least a dozen times in the past two and a half years, circumventing decades-old American export restrictions meant to curb such sales.

A Wall Street Journal review of procurement documents found that the state-run China Academy of Engineering Physics has managed to obtain the semiconductors made by U.S. companies such as Intel Corp. and Nvidia Corp. since 2020 despite its placement on a U.S. export blacklist in 1997.

Missing Radioactive Capsule Prompts Search and Concern in Australia

ADELAIDE, Australia-In the Australian Outback, authorities are engaged in an unusual search-and-recovery effort. Gone missing is an 8-millimeter-long capsule of radioactive material that can burn or sicken anyone who touches it.

Their problem is that it could be anywhere along a 900-mile stretch of highway connecting a Rio Tinto PLC mine to Perth, Western Australia's state capital, a route featuring small towns and communities in an arid landscape of wiry shrubs and red desert sands. The capsule, which contains a small quantity of radioactive Caesium-137, worked its way loose from a piece of equipment that Rio Tinto had sent to Perth by truck for repair.

Russia Tightens Grip Around Bakhmut as Ukraine Awaits Western Tanks

BAKHMUT, Ukraine-Russia's invasion forces tightened the noose around this beleaguered city in eastern Ukraine, while Kyiv urged the West to provide longer-range firepower to counter Russia's missile barrages.

Ukrainian troops here described mounting difficulties in stopping the Russian advances around Bakhmut, the site of this winter's heaviest fighting in the 11-month-old war.

Israel, Palestinians Caught in Escalating Cycle of Violence in Jerusalem and West Bank

JENIN, West Bank-A recent spiral of violence between Israel and the Palestinians is worsening after two gun attacks in Jerusalem and a wave of Israeli raids in the West Bank.

The deteriorating situation has raised concern among world leaders and poses the first major security test for Israeli Prime Minister Benjamin Netanyahu's new right-wing and religiously conservative government, which came to power last year amid an aggressive military campaign to weed out militants in the occupied West Bank. Since then, near-daily raids by Israeli security forces have led to a rising Palestinian death toll. A spate of Palestinian terrorist attacks in Israel threatens to cause further instability ahead of a Monday visit by U.S. Secretary of State Antony Blinken, the latest U.S. official to head to Jerusalem in recent days.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

01-30-23 0621ET