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Business

Rheinmetall eyes boost in munitions output, HIMARS production in Germany

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DUESSELDORF, Jan 29 (Reuters) – German arms-maker Rheinmetall is ready to greatly boost the output of tank and artillery munitions to satisfy strong demand in Ukraine and the West, and may start producing HIMARS multiple rocket launchers in Germany, CEO Armin Papperger told Reuters.

He spoke days before Germany’s defence industry bosses are due to meet new defence minister Boris Pistorius for the first time, though the exact date has yet to be announced.

With the meeting, Pistorius aims to kick off talks on how to speed up weapons procurement and boost ammunitions supplies in the long term after almost a year of arms donations to Ukraine has depleted the German military’s stocks.

Rheinmetall (RHMG.DE) makes a range of defence products but is probably most famous for manufacturing the 120mm gun of the Leopard 2 tank.

“We can produce 240,000 rounds of tank ammunition (120mm) per year, which is more than the entire world needs,” Papperger said in an interview with Reuters.

The capacity for the production of 155mm artillery rounds can be ramped up to 450,000 to 500,000 per year, he added, which would make Rheinmetall the biggest producer for both kinds of ammunition.

In 2022, Rheinmetall made some 60,000 to 70,000 rounds each of tank and artillery shells, according to Papperger, who said production could be boosted immediately.

Demand for these munitions has soared since Russia’s invasion of Ukraine last February, not only due to their massive use on the battlefield but also as Western militaries backfill their own stocks, bracing for what they see as a heightened threat from Moscow.

Papperger said a new production line for medium calibre ammunition, used by German-built Gepard anti-aircraft tanks in Ukraine for example, would go live by mid-year.

Germany has been trying for months to find new munitions for the Gepard that its own military had decomissioned in 2010.

HIMARS PRODUCTION LINE IN GERMANY?

At the same time, Rheinmetall is in talks with Lockheed Martin(LMT.N), the U.S. company manufacturing the HIMARS (High Mobility Artillery Rocket System) multiple rocket launchers in heavy use with Ukrainian troops, Papperger said.

“At the Munich Security Conference, we aim to strike an agreement with Lockheed Martin to kick off a HIMARS production (in Germany),” he said, referring to an annual gathering of political and defence leaders in mid-February.

“We have the technology for the production of the warheads as well as for the rocket motors – and we have the trucks to mount the launchers upon,” Papperger said, adding a deal may prompt investments of several hundred million euros of which Rheinmetall would finance a major part.

Rheinmetall also eyes the operation of a new powder plant, possibly in the eastern German state of Saxony, but the investment of 700 to 800 million euros would have to be footed by the government in Berlin, he said.

“The state has to invest, and we contribute our technological know-how. In return, the state gets a share of the plant and the profits it makes,” Papperger suggested.

“This is an investment that is not feasible for the industry on its own. It is an investment into national security, and therefore we need the federal state,” he said.

The plant is needed as shortages in the production of special powders could turn out to be a bottleneck, hampering efforts to boost the output of tank and artillery shells, he noted.

A few days before the meeting with the new defence minister, Papperger pushed for an increase of Germany’s defence budget.

“The 51 billion euros in the defence budget will not suffice to purchase everything that is needed. And the money in the 100 billion euro special funds has already been earmarked – and partially been eaten up by inflation,” he said.

“100 billion euros sounds like a giant sum but we would actually need a 300 billion euro package to order everything that’s needed,” he added, noting that the 100 billion special fund does not include ammunitions purchases.

Even before Russia’s invasion of Ukraine, Germany was 20 billion euros short of reaching NATO’s target for ammunitions stockpiling, according to a defence source.

To plug the munitions gap alone, Papperger estimates the Bundeswehr (German armed forces) would need to invest three to four billion euros per year.

In the talks with the minister, the defence boss hopes for a turn towards a more sustainable long-term planning in German procurement, stretching several years into the future, as the industry needed to be able to make its arrangements in time.

“What we are doing at the moment is actually war stocking: Last year, we prefinanced 600 to 700 million euros for goods,” Papperger said. “We must move away from this crisis management – it is crisis management when you buy (raw materials and other things) without having a contract – and get into a regular routine.”

Reporting by Sabine Siebold, Editing by Angus MacSwan

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Science

U.S. to test nuclear-powered spacecraft by 2027

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WASHINGTON, Jan 24 (Reuters) – The United States plans to test a spacecraft engine powered by nuclear fission by 2027 as part of a long-term NASA effort to demonstrate more efficient methods of propelling astronauts to Mars in the future, the space agency’s chief said on Tuesday.

NASA will partner with the U.S. military’s research and development agency, DARPA, to develop a nuclear thermal propulsion engine and launch it to space “as soon as 2027,” NASA administrator Bill Nelson said during a conference in National Harbor, Maryland.

The U.S. space agency has studied for decades the concept of nuclear thermal propulsion, which introduces heat from a nuclear fission reactor to a hydrogen propellant in order to provide a thrust believed to be far more efficient than traditional chemical-based rocket engines.

NASA officials view nuclear thermal propulsion as crucial for sending humans beyond the moon and deeper into space. A trip to Mars from Earth using the technology could take roughly four months instead of some nine months with a conventional, chemically powered engine, engineers say.

That would substantially reduce the time astronauts would be exposed to deep-space radiation and would also require fewer supplies, such as food and other cargo, during a trip to Mars.

“If we have swifter trips for humans, they are safer trips,” NASA deputy administrator and former astronaut Pam Melroy said Tuesday.

The planned 2027 demonstration, part of an existing DARPA research program that NASA is now joining, could also inform the ambitions of the U.S. Space Force, which has envisioned deploying nuclear reactor-powered spacecraft capable of moving other satellites orbiting near the moon, DARPA and NASA officials said.

DARPA in 2021 awarded funds to General Atomics, Lockheed Martin and Jeff Bezos’ space company Blue Origin to study designs of nuclear reactors and spacecraft. By around March, the agency will pick a company to build the nuclear spacecraft for the 2027 demonstration, the program’s manager Tabitha Dodson said in an interview.

The joint NASA-DARPA effort’s budget is $110 million for fiscal year 2023 and is expected to be hundreds of millions of dollars more through 2027.

Reporting by Joey Roulette; Editing by Chizu Nomiyama and David Gregorio

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World

Nepal finds black boxes of aircraft after deadliest crash in 30 years

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  • Searchers find bodies of two of four missing passengers
  • Rescue efforts paused after poor weather hampers operation
  • Cockpit voice, flight data recorders found in good shape
  • Nepal observes day of national mourning, launches probe

KATHMANDU, Jan 16 (Reuters) – Searchers found the cockpit voice recorder and flight data recorder on Monday from a passenger flight that crashed, killing at least 70 people in Nepal’s worst plane accident for 30 years, officials said.

The data on the recorders may help investigators determine what caused the Yeti Airlines ATR 72 aircraft, carrying 72 people, to go down in clear weather on Sunday just before landing in the tourist city of Pokhara.

Reuters Graphics

Both recorders were in good shape and will be sent for analysis based on the recommendation of the manufacturer, Teknath Sitaula, a Kathmandu airport official, told Reuters.

Under international aviation rules, the crash investigation agency of the country where the plane was designed and built is automatically part of the inquiry.

ATR is based in France and the plane’s engines were manufactured in Canada by Pratt & Whitney Canada (RTX.N).

Nepal’s Civil Aviation Authority has inspected all ATR 72 and ATR 42 aircraft operating in the country since the crash and found no technical faults in them, it said in a statement on Monday.

There are currently 16 ATR 72 aircraft and three ATR 42s with multiple airlines in the country, an aviation authority official said.

Rescuers battled cloudy weather and poor visibility on Monday as they scoured a river gorge for passengers who are unaccounted for, more than 24 hours after the crash.

Two more bodies were recovered on Monday, taking the death toll to 70, said Navin Acharya, an official at the rescue coordination centre at Kathmandu airport. The search was called off for the remaining two missing people as darkness descended and will resume on Tuesday, he said.

Pokhara police official Ajay K.C. said all bodies had been sent to a hospital.

In the capital Kathmandu around 100 people lit candles at a gathering in memory of the crash victims and called on the government to ensure proper safety standards, witnesses said.

Condolences poured in from around the world, including the Vatican.

“His Holiness Pope Francis sends his condolences to you and to all affected by this tragedy, together with his prayers for those involved in the recovery efforts,” Cardinal Secretary of State Pietro Parolin said in a message to Nepal’s president.

[1/7] A rescue team recovers the body of a victim from the site of the plane crash of a Yeti Airlines operated aircraft, in Pokhara, Nepal January 16, 2023. REUTERS/Rohit Giri

Reuters footage from the crash site showed rescuers looking at the charred remains of the plane near a mountain gorge.

The plane, on a scheduled flight from Kathmandu to Pokhara, gateway to the scenic Annapurna mountain range, was carrying 57 Nepalis, five Indians, four Russians, two South Koreans, and one person each from Argentina, Ireland, Australia and France.

The aircraft had flown more than 1,700 times in the past one year.

Minutes before the aircraft was to land on Sunday, the pilot asked for a change of runway, a spokesperson for Pokhara airport said on Monday. “The permission was granted. “We don’t ask (why), whenever a pilot asks we give permission to change approach,” spokesperson Anup Joshi said.

Sunday’s crash underlined the need for the government to break up the Civil Aviation Authority of Nepal (CAAN), which both regulates airlines and manages airports, experts said.

“The government must immediately separate the regulatory body and service provider by splitting the Civil Aviation Authority of Nepal (CAAN) which is doing both works now,” K.B. Limbu, an aviation expert and a retired pilot, told Reuters.

“This leads to a conflict of interests.”

Asked for comment, Sitaula, the Kathmandu airport official, denied there was any such conflict in the functioning of CAAN.

“The regulatory and service provider (airport management) officials are separate and there is no cross-movement between the two bodies operating under the same organisation,” he said, referring to the CAAN.

There are nine domestic airlines in Nepal, including Yeti Airlines and its unit Tara Air. Yeti and Tara plane crashes have killed at least 165 people in Nepal since 2000 out of a total of 359 dead from aviation accidents, according to data from CAAN.

Reuters Graphics

An additional 75 people have died in helicopter crashes this century in Nepal, which is home to eight of the world’s 14 highest mountains, including Everest, and where sudden weather changes can make for hazardous conditions.

Experts say air accidents are usually caused by a combination of factors, and investigations can take months or longer.

Anju Khatiwada, the co-pilot of Sunday’s ill-fated aircraft, lost her husband Dipak Pokhrel in a similar crash in 2006. Khatiwada’s remains have not been identified but she is feared dead.

Nepal observed a day of national mourning on Monday and set up a panel to investigate the disaster and suggest measures to avoid such incidents in future.

Reporting by Gopal Sharma, writing by Shilpa Jamkhandikar and Shivam Patel; Editing by Gerry Doyle, Raju Gopalakrishnan and Mark Heinrich

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World

At least 64 killed in Nepal’s worst air crash in 30 years

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KATHMANDU, Jan 15 (Reuters) – At least 64 people were killed on Sunday when a domestic flight crashed in Pokhara in Nepal, the small Himalayan country’s worst air crash in three decades.

Hundreds of rescue workers were scouring the hillside where the Yeti Airlines flight, carrying 72 people from the capital Kathmandu, went down.

Local TV showed rescue workers scrambling around broken sections of the aircraft. Some of the ground near the crash site was scorched, with licks of flames visible.

“We have sent 31 bodies to the hospital and are still taking out 33 bodies from the gorge,” said police official Ajay K.C., adding that rescue workers were having difficulty reaching the site in a gorge between two hills near the tourist town’s airport.

Reuters Graphics

The crash is Nepal’s deadliest since 1992, the Aviation Safety Network database showed, when a Pakistan International Airlines Airbus A300 crashed into a hillside upon approach to Kathmandu, killing all 167 people on board.

The plane made contact with the airport from Seti Gorge at 10:50 a.m. (0505 GMT), the aviation authority said in a statement. “Then it crashed.”

“Half of the plane is on the hillside,” said Arun Tamu, a local resident, who told Reuters he reached the site minutes after the plane went down. “The other half has fallen into the gorge of the Seti river.”

Khum Bahadur Chhetri said he watched from the roof of his house as the flight approached.

“I saw the plane trembling, moving left and right, and then suddenly its nose dived and it went into the gorge,” Chhetri told Reuters, adding that local residents took two passengers to a hospital.

The government has set up a panel to investigate the cause of the crash and it is expected to report within 45 days, the finance minister, Bishnu Paudel, told reporters.

SERIES OF CRASHES

At least 309 people have died since 2000 in plane or helicopter crashes in Nepal – home to eight of the world’s 14 highest mountains, including Everest – where sudden weather changes can make for hazardous conditions.

The European Union has banned Nepali airlines from its airspace since 2013, citing safety concerns.

Those on the twin-engine ATR 72 aircraft included two infants and four crew members, said airline spokesman Sudarshan Bartaula.

The journey to Pokhara, Nepal’s second largest city tucked under the picturesque Annapurna mountain range, from the capital Kathmandu is one of the Himalayan country’s most popular tourist routes, with many preferring a short flight instead of a six-hour-long drive through hilly roads.

The weather on Sunday was clear, said Jagannath Niroula, spokesman for Nepal’s Civil Aviation Authority.

Passengers included five Indians, four Russians and one Irish, two South Korean, one Australian, one French and one Argentine national.

The ATR72 of European planemaker ATR is a widely used twin engine turboprop plane manufactured by a joint venture of Airbus (AIR.PA) and Italy’s Leonardo (LDOF.MI). Yeti Airlines has a fleet of six ATR72-500 planes, according to its website.

“ATR specialists are fully engaged to support both the investigation and the customer,” the company said on Twitter, adding that its first thoughts were for those affected, after having been informed of the accident.

Airbus and Leonardo did not immediately respond to requests for comment.

Flight tracking website FlightRadar24 said on Twitter the Yeti Airlines aircraft was 15 years old and equipped with an old transponder with unreliable data.

“We are downloading high-resolution data and verifying the data quality,” it said.

On its website, Yeti describes itself as a leading domestic carrier. Its fleet consists of six ATR 72-500s, including the one that crashed. It also owns Tara Air, and the two together offer the “widest network” in Nepal, the company says.

Reporting by Gopal Sharma; Additional reporting by Jamie Freed; Writing by Devjyot Ghoshal and Aditya Kalra; Editing by William Mallard and Susan Fenton

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Business

Western Europe’s first satellite launch mission takes off

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  • Converted Boeing 747 takes off from Newquay, Cornwall
  • Rocket will be deployed over the Atlantic in next hour
  • ‘Start Me Up’ mission will deploy nine small satellites

NEWQUAY, England, Jan 9 (Reuters) – Virgin Orbit’s “Cosmic Girl” carrier aircraft took off from Newquay’s spaceport in Cornwall, southwest England on Monday night, the initial stage of Western Europe’s first ever satellite launch.

The modified Boeing 747 with a rocket under its wing took to the air and then soared out over the Atlantic Ocean, where after an hour it will release a rocket at about 35,000 feet (10,668 meters).

More than 2,000 space fans cheered when the aircraft left the runway.

The “horizontal” launch has catapulted the resort in southwest England – population 20,000 and famous for its reliable Atlantic waves – into the limelight as Western Europe’s go-to destination for small satellites.

Virgin Orbit (VORB.O), part-owned by British billionaire Richard Branson, said nine satellites would be deployed into lower Earth orbit (LEO) from its LauncherOne rocket in its first mission outside its United States base.

($1 = 0.8213 pounds)

Additional reporting by Sarah Young; editing by Nick Macfie and Sandra Maler, Kate Holton

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Business

Historic UK satellite launch may spur military appetite

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Jan 8 (Reuters) – A mobile air-launched rocket system to be used in Britain’s first domestic satellite launch could sow the seeds for a globally dispersed rapid-response capability to put extra eyes in space in times of war, executives and analysts said.

Virgin Orbit (VORB.O), part-owned by billionaire Richard Branson, plans to launch nine satellites from a LauncherOne rocket attached under the wing of a modified Boeing 747, to be flown from a new spaceport in Cornwall on Monday.

Barring delays, it will be the first time a satellite has departed from western European soil.

For now the focus is on commercial payloads from companies such as Space Forge, which is developing in-orbit manufacturing.

But the launch is also seen by many as a blueprint for quicker launches of limited satellite capacity for tactical military purposes, in what planners call “Responsive Launch”.

“Ukraine woke up the world in a lot of ways,” Virgin Orbit Chief Executive Dan Hart told a news conference in southwest England on Sunday.

“Clearly there is a hope of a pan-European, as well as a U.S. collaboration … and that we have responsiveness so that if something happens in the world, we can get assets there right away,” he told the pre-launch briefing, monitored online.

Virgin Orbit said last year Britain’s Royal Air Force was doing exercises to demonstrate the value of “Responsive Launch”.

Britain had a brief foray into space launch activities in the late 1960s and early 1970s, when its Black Arrow rocket was cancelled after just one successful mission.

The rocket’s four launches took place in Australia in an era when commercial satellites barely existed.

Now, constellations of miniaturised satellites are heading an explosion of commercial activity in low Earth orbit.

‘FLEXIBLE AND AGILE’

Lobbing small satellites into low orbit at short notice would do little more than fill temporary gaps in coverage from large spy satellites, but experts say the technology has some dual civil and military potential and could spread costs.

“It gives you greater resilience or redundancy or duality of systems, whether that’s for position, navigation and timing or quicker access … as we’ve seen in Ukraine,” Ian Annett, deputy chief executive of the UK Space Agency, told Sunday’s briefing.

“It’s a natural transition that helps us develop security capabilities, but also, for government, keeps costs down whilst providing commercial opportunities as well.”

Elon Musk’s SpaceX activated its Starlink constellation over Ukraine after Russia’s invasion last February. Its communication links have been used by civilians and by Ukraine’s military.

Luxembourg said in October it had signed a letter of intent with Virgin Orbit to develop a “rapid and flexible response to different threats”, for NATO and other allies.

Its defence ministry has called for “new, more flexible and agile satellite launch procedures and techniques from Europe”.

Britain’s own 2022-25 space roadmap calls for dual-use capabilities in Earth Observation and Space Domain Awareness.

Virgin Orbit is also talking to Japan and Australia.

Questions remain, however, over how quickly the mobile launch concept could work its way into actual budgets, which are dwarfed by U.S. spending on space.

“Everyone is playing up military space as the next big thing,” said UK-based defence analyst Francis Tusa. “But ministries of defence have eyes larger than their stomachs.”

The system’s liquid propellant and final rocket assembly also require some local infrastructure, and Europe’s crowded airspace has thrown up significant regulatory obstacles.

“At the moment, it’s a bit bigger on the commercial side, but we see the defence and national security side growing so I think in this steady state, it’ll probably end up being 50/50,” Hart told Reuters.

Reporting by Tim Hepher; Additional reporting by Joey Roulette; Editing by David Holmes

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Science

NASA mulls SpaceX backup plan for crew of Russia’s leaky Soyuz ship

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  • NASA asks SpaceX about its Crew Dragon backup capabilities
  • NASA, Russia’s space agency probing cause of Soyuz leak
  • Three-man Soyuz crew’s return ride from space station unclear

WASHINGTON, Dec 28 (Reuters) – NASA is exploring whether SpaceX’s Crew Dragon spacecraft can potentially offer an alternative ride home for some crew members of the International Space Station after a Russian capsule sprang a coolant leak while docked to the orbital lab.

NASA and Russia’s space agency, Roscosmos, are investigating the cause of a punctured coolant line on an external radiator of Russia’s Soyuz MS-22 spacecraft, which is supposed to return its crew of two cosmonauts and one U.S. astronaut to Earth early next year.

But the Dec. 14 leak, which emptied the Soyuz of a vital fluid used to regulate crew cabin temperatures, has derailed Russia’s space station routines, with engineers in Moscow examining whether to launch another Soyuz to retrieve the three-man team that flew to ISS aboard the crippled MS-22 craft.

If Russia cannot launch another Soyuz ship, or decides for some reason that doing so would be too risky, NASA is weighing another option.

“We have asked SpaceX a few questions on their capability to return additional crew members on Dragon if necessary, but that is not our prime focus at this time,” NASA spokeswoman Sandra Jones said in a statement to Reuters.

SpaceX did not respond to a Reuters request for comment.

It was unclear what NASA specifically asked of SpaceX’s Crew Dragon capabilities, such as whether the company can find a way to increase the crew capacity of the Dragon currently docked to the station, or launch an empty capsule for the crew’s rescue.

But the company’s potential involvement in a mission led by Russia underscores the degree of precaution NASA is taking to ensure its astronauts can safely return to Earth, should one of the other contingency plans arranged by Russia fall through.

The leaky Soyuz capsule ferried U.S. astronaut Frank Rubio and cosmonauts Sergey Prokopyev and Dimitri Petelin to the space station in September for a six-month mission. They were scheduled to return to Earth in March 2023.

The station’s four other crew members – two more from NASA, a third Russian cosmonaut and a Japanese astronaut – arrived in October via a NASA-contracted SpaceX Crew Dragon capsule, which also remains parked at the ISS.

SpaceX’s Crew Dragon capsule, a gumdrop-shaped pod with four astronaut seats, has become the centerpiece to NASA’s human spaceflight efforts in low-Earth orbit. Besides Russia’s Soyuz program, it is the only entity capable of ferrying humans to the space station and back.

THREE POSSIBLE CULPRITS

Finding what caused the leak could factor into decisions about the best way to return the crew members. A meteroid-caused puncture, a strike from a piece of space debris or a hardware failure on the Soyuz capsule itself are three possible causes of the leak that NASA and Roscosmos are investigating.

A hardware malfunction could raise additional questions for Roscosmos about the integrity of other Soyuz vehicles, such as the one it might send for the crew’s rescue, said Mike Suffredini, who led NASA’s ISS program for a decade until 2015.

“I can assure you that’s something they’re looking at, to see what’s back there and whether there’s a concern for it,” he said. “The thing about the Russians is they’re really good at not talking about what they’re doing, but they’re very thorough.”

Roscosmos chief Yuri Borisov had previously said engineers would decide by Tuesday how to return the crew to Earth, but the agency said that day it would make the decision in January.

NASA has previously said the capsule’s temperatures remain “within acceptable limits,” with its crew compartment currently being vented with air flow allowed through an open hatch to the ISS.

Sergei Krikalev, Russia’s chief of crewed space programs, told reporters last week that the temperature would rise rapidly if the hatch to the station were closed.

NASA and Roscosmos are primarily focusing on determining the leak’s cause, Jones said, as well as the health of MS-22 which is also meant to serve as the three-man crew’s lifeboat in case an emergency on the station requires evacuation.

A recent meteor shower initially seemed to raise the odds of a micrometeoroid strike as the culprit, but the leak was facing the wrong way for that to be the case, NASA’s ISS program manager Joel Montalbano told reporters last week, though a space rock could have come from another direction.

And if a piece of space debris is to blame, it could fuel concerns of an increasingly messy orbital environment and raise questions about whether such vital equipment as the spacecraft’s coolant line should have been protected by debris shielding, as other parts of the MS-22 spacecraft are.

“We are not shielded against everything throughout the space station,” Suffredini said. “We can’t shield against everything.”

Reporting by Joey Roulette; Editing by Emelia Sithole-Matarise

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World

Elon Musk says around 100 Starlinks now active in Iran

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Dec 26 (Reuters) – SpaceX Chief Executive Elon Musk said on Monday that the company is now close to having 100 active Starlinks, the firm’s satellite internet service, in Iran, three months after he tweeted he would activate the service there amid protests around the Islamic country.

Musk said, “approaching 100 starlinks active in Iran”, in a tweet on Monday.

The billionaire had said in September that he would activate Starlink in Iran as part of a U.S.-backed effort “to advance internet freedom and the free flow of information” to Iranians.

The satellite-based broadband service could help Iranians circumvent the government’s restrictions on accessing the internet and certain social media platforms amid protests around the country.

The Islamic Republic has been engulfed in protests that erupted after the death in September of 22-year-old Mahsa Amini in police custody after being arrested by the morality police for wearing “unsuitable attire”.

Reporting by Akanksha Khushi in Bengaluru; Editing by Sandra Maler

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Business

Wall Street falls fourth straight day as recession worries nag

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  • Fed hikes, recession fears in focus
  • L3Harris slides after $4.7 bln Aerojet buyout Indexes down: Dow 0.49%, S&P 0.90%, Nasdaq 1.49%

Dec 19 (Reuters) – Wall Street closed lower on Monday for a fourth straight session with Nasdaq leading declines as investors shied away from riskier bets, worried the Federal Reserve’s tightening campaign could push the U.S. economy into a recession.

The three major U.S. stock indexes have been under pressure since Wednesday, when Fed Chair Jerome Powell took a hawkish tone while the central bank raised interest rates. Powell promised further rate increases even as data showed signs of a weakening economy.

The S&P 500 (.SPX), the Dow Jones industrials (.DJI) and the Nasdaq have sold off sharply for December and are on track for their biggest annual declines since the 2008 financial crisis.

While U.S. Treasury yields gained, investors ran from stocks, eyeing prospects of safer bets as they worried about the likelihood of a recession in 2023 according to Brian Overby, senior markets strategist at Ally.

“Investors are asking why do I want to take those risks going into 2023 with the Fed’s stance still aggressive when I can get such a good yield on the fixed income market place,” he said.

The lack of big earnings reports or economic data on Monday likely sharpened investors’ focus on economic fears and interest rates, according to Melissa Brown, Global Head of Applied Research at Qontigo in New York.

“It’s a knife edge between whether we’re going to teeter into a recession or have a soft landing. Is the Fed acting appropriately?” said Brown who also noted that moves may be exaggerated as many investors take vacation around the end-of-year holidays.

The Dow Jones Industrial Average (.DJI) fell 162.92 points, or 0.49%, to 32,757.54, the S&P 500 (.SPX) lost 34.7 points, or 0.90%, to 3,817.66 and the Nasdaq Composite (.IXIC) dropped 159.38 points, or 1.49%, to 10,546.03.

The biggest decliners among S&P industry sectors were communications services (.SPLRCL), which fell 2.2%, consumer discretionary (.SPLRCD), down 1.7% and technology (.SPLRCT), which lost 1.4%. Energy (.SPNY) outperformed, closing up 0.13% as the sole industry out of 11 to manage a gain.

Market heavyweights such as Apple Inc (AAPL.O), Microsoft Corp (MSFT.O) and Amazon.com Inc (AMZN.O) created some of the biggest drags on the market.

Trading in Tesla Inc (TSLA.O) was volatile with the electric carmaker closing down 0.24% after falling as much as 2.8% during the session. This was after a Twitter poll that showed a majority of respondents want Tesla Chief Executive Elon Musk to step down as CEO of the social media platform.

Meta Platforms (META.O) shares finished down 4.1% after the European Commission said it could impose a fine of up to 10% of the tech conglomerate’s annual global turnover if evidence showed an infringement of the EU’s antitrust laws.

L3Harris Technologies Inc (LHX.N) lost 3.6% after the U.S. defense contractor said it would buy hypersonic engine manufacturer Aerojet Rocketdyne Holdings Inc (AJRD.N) for $4.7 billion. Aerojet added 1.3%.

Shares of casino operators Melco Resorts & Entertainment tumbled just under 8% and Wynn Resorts (WYNN.O) lost 5.2% while Las Vegas Sands Corp (LVS.N) fell 2.3% after Macau said on Friday that six casino firms will invest around $15 billion as part of new 10-year contracts they signed to operate in the world’s biggest gambling hub.

Declining issues outnumbered advancing ones on the NYSE by a 2.80-to-1 ratio; on Nasdaq, a 2.63-to-1 ratio favored decliners.

The S&P 500 posted 5 new 52-week highs and 20 new lows; the Nasdaq Composite recorded 66 new highs and 456 new lows.

On U.S. exchanges 11.07 billion shares changed hands, compared with the 11.59 billion average for the last 20 trading days.

Reporting by Sinéad Carew, Sruthi Shankar, Shubham Batra, Johann M Cherian and Sruthi Shankar in Bengaluru; Editing by Saumyadeb Chakrabarty, Maju Samuel and David Gregorio

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World

Pacifist Japan unveils biggest military build-up since World War Two

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TOKYO, Dec 16 (Reuters) – Japan on Friday unveiled its biggest military build-up since World War Two with a $320 billion plan that will buy missiles capable of striking China and ready it for sustained conflict, as regional tensions and Russia’s Ukraine invasion stoke war fears.

The sweeping, five-year plan, once unthinkable in pacifist Japan, will make the country the world’s third-biggest military spender after the United States and China, based on current budgets.

Prime Minister Fumio Kishida, who described Japan and its people as being at a “turning point in history”, said the ramp-up was “my answer to the various security challenges that we face”.

His government worries that Russia has set a precedent that will encourage China to attack Taiwan, threatening nearby Japanese islands, disrupting supplies of advanced semiconductors and putting a potential stranglehold on sea lanes that supply Middle East oil.

“This is setting a new heading for Japan. If appropriately executed, the Self-Defense Forces will be a real, world-class effective force,” said Yoji Koda, a former Maritime Self Defense Force admiral, who commanded the Japanese fleet in 2008.

The government said it would also stockpile spare parts and other munitions, expand transport capacity and develop cyber warfare capabilities. In its postwar, American-authored constitution, Japan gave up the right to wage war and means to do so.

“Russia’s invasion of Ukraine is a serious violation of laws that forbid the use of force and has shaken the foundations of the international order,” the strategy paper said.

“The strategic challenge posed by China is the biggest Japan has ever faced,” it added, also noting that Beijing had not ruled out using force to bring Taiwan under its control.

A separate national security strategy document that pointed to China, Russia and North Korea, promised close cooperation with the United States and other like-minded nations to deter threats to the established international order.

“The Prime Minister is making a clear, unambiguous strategic statement about Japan’s role as a security provider in the Indo-Pacific,” U.S. Ambassador to Japan Rahm Emanuel said in a statement. “He has put a capital “D” next to Japan’s deterrence,” he added.

Meeting Japan-Taiwan Exchange Association Chairman Mitsuo Ohashi in Taipei on Friday, Taiwan President Tsai Ing-wen said she expected greater defence cooperation with Japan.

“We look forward to Taiwan and Japan continuing to create new cooperation achievements in various fields such as national defence and security, the economy, trade, and industrial transformation,” the presidential office cited Tsai as saying.

China accused Japan of making false claims about China’s military activities in the new security strategy, according to a statement from its embassy in Japan.

UKRAINE LESSON

“The Ukraine war has shown us the necessity of being able to sustain a fight, and that is something Japan has not so far been prepared for,” said Toshimichi Nagaiwa, a retired Air Self-Defense Force general. “Japan is making a late start, it is like we are 200 metres behind in a 400-metre sprint,” he added.

China defence spending overtook Japan’s at the turn of the century, and now has a military budget more than four times larger. Too few munitions and a lack of spare parts that ground planes and put other military equipment out of action are the most immediate problems for Japan to tackle, military sources have told Reuters.

Kishida’s plan will double defence outlays to about 2% of gross domestic product over five years, blowing past a self-imposed 1% spending limit that has been in place since 1976.

It will increase the defence ministry’s budget to around a tenth of all public spending at current levels, and will make Japan the world’s third-biggest military spender after the United States and China, based on current budgets.

That splurge will provide work to Japanese military equipment makers such as Mitsubishi Heavy Industries (MHI) (7011.T), which is expected to lead development of three of the longer-range missiles that will be part of Japan’s new missile force.

MHI will also build Japan’s next jet fighter alongside BAE Systems PLC (BAES.L) and Leonardo SPA (LDOF.MI) in a joint project between Japan, Britain and Italy announced last week.

Tokyo allocated $5.6 billion for that in the five-year defence programme.

Foreign companies will also benefit. Japan says it wants ship-launched U.S. Tomahawk cruise missiles made by Raytheon Technologies (RTX.N) to be part of its new deterrent force.

Other items on Japan’s military shopping list over the next five years include interceptor missiles for ballistic missile defence, attack and reconnaissance drones, satellite communications equipment, Lockheed Martin F-35 stealth fighters, helicopters, submarines, warships and heavy-lift transport jets.

To pay for that equipment, Kishida’s ruling bloc earlier on Friday said it would raise tobacco, corporate and disaster-reconstruction income taxes. But, with opposition to tax hikes within his ruling Liberal Democratic party still strong, the Japanese leader has yet to say when he will implement those higher rates.

Reporting by Tim Kelly, Sakura Murakami and Nobuhiro Kubo in TOKYO; Additional reporting by Ben Blanchard in TAIPEI and Eduardo Baptista in SHANGHAI; Editing by David Dolan, Gerry Doyle, Jon Boyle, William Maclean

Our Standards: The Thomson Reuters Trust Principles.

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