Saudi-Backed Forces Launch Major Counteroffensive

(upbeat music) Saudi Arabia takes on Yemen's Houthis in a counter-offensive aimed at protecting the Kingdom's energy exports. We'll look at the challenging fight to come. This is land that really is in favor of guerrilla fighting, that the Houthis employ in their command of the areas that they control. And that makes it more difficult for air strikes alone to be able to do the job. Plus, Germany and France dial up their campaign to stem the flood of cheap Chinese goods. And if you had opted out of a Trump account for your child, you might want to check again after the administration auto enrolls more than 60 million kids. It's Tuesday, October 6th. I'm Luke Varkis for the Wall Street Journal. And here is the AM edition of What's News, the top headlines and business stories moving your world today. Saudi Arabia is dialing up its fight against the Houthis in a bid to dislodge the fighters from a strategic port and ease pressure on energy exports. With me to discuss this long-awaited offensive as the journal's deputy Middle East bureau chief, John Gambrell. John, we are reporting that the Saudis are using 100 jet fighters here to provide air cover to Yemeni ground troops in this counter-offensive. This sounds like a major push to see that much hardware being brought to the fight. What does that tell us about the stakes of this mission for Saudi Arabia? For Saudi Arabia, this has become increasingly dire over recent weeks as Yemen's Houthi rebels who have held Yemen's capital back since 2014 have really moved down south along the coastline of the Red Sea. They've taken a crucial island there known as Param Island. And they're also threatening a city called Tayez. And more importantly, likely for the world economy is the Houthis were able to put more pressure on the Red Sea. And the Babel Mondeb is basically the Red Sea's version of the Strait of Hormuz. Without the Babel Mondeb being open, ships that go through the Suez Canal can not then pass onto the Gulf of Aden and then onto Asia. And ships then going north to try to get to Europe can't reach there if the Houthis were able to shut that off. Now, traffic has been going through. It's still been really reduced there since the Houthi attacks during the Israel-Hamas war. But that being said, the Houthis have launched attacks on Saudi ships there, especially those carrying crude oil. They have also targeted Saudi oil infrastructure that came also when we saw this drone attack that was launched from Iraq that targeted the East-West pipeline, which has been crucial for the kingdom and getting oil out since the Strait of Hormuz has been basically contested water since the Iran war. So if the Houthis are able to put more pressure on Babel Mondeb, that really could have a knock-on effect on the seasawing global energy market. John, the Saudis bringing a lot of firepower to bear here, also calling in various groups in Yemen to try to dislodge the Houthis. But we should note, without getting too deep into the story of the Yemeni Civil War, the Saudis have trained a lot of firepower at the Houthis before and yet we're still in this situation. The Houthis have been dug in in Sana'a and the capital of Yemen since 2014 and effort after effort to try to get them out of the capital. So far has not met with stiff resistance. The Houthis control basically the northern part, the northwestern part of the country, and any sort of push further up towards Sana'a is likely to be heavily contested. They are a major power and efforts to try to reach some sort of power-sharing structure in Yemen so far hasn't reached any success. But analysts say that that's going to really be the only way forward in this war that just continues to choke at the Arab world's poorest country. I mean, not to oversimplify it, but it's sort of surprising, right? How resilient they've been. I mean, we often, in our stories about the Houthis show, men in the back of pickup trucks with light weaponry, here going up against 100 jets, and yet they've been able to hold on. Yemen is big desert. It's high mountain peaks. It's really tough terrain. This is land that really is in favor of guerrilla fighting that the Houthis employ in their command of the areas that they control. And that makes it more difficult for sort of air strikes alone to be able to do the job in dislodging the Houthis. That's why they've been able to hold on for so long. And as long as the forces that are allied against them in Yemen remain scattered and not really unified, it's going to be really challenging to try to push on the ground to loosen their grip on the country. I've been speaking to the journalist, Deputy Middle East, Bureau Chief John Gambrell. John, super helpful there. Thanks so much for being with us. My pleasure. [MUSIC PLAYING] Students in France are staging another major day of protests after organizers called for a nationwide day of action. [NON-ENGLISH SPEECH] Hundreds have been injured in around 400 schools have had to shut since protests first erupted in mid-September. According to France's interior minister, officers made more than 5,000 arrests last week, 85% of them minors. Teachers, students, and now parents are mobilizing against a lack of staff in high schools, perceived inequalities in the school system, as well as the state of school buildings nationwide. The journal's Paris Bureau Chief Stacey Mitry says the protests are mounting pressure on President Emmanuel Macron's government, which last week earmarked roughly $74 billion for schools more than it's setting aside for defense. What protesters are demanding, the students and teachers, as well as political parties that have joined the protests, is an expansion in government spending, particularly on the education system. Now, protesters argue that the schools have become dilapidated over the years, that there's too many students in each classroom that teachers aren't properly compensated. So they're demanding that the French government do the one thing that absolutely cannot do, which is to increase spending. And Stacey says that France's already ballooning budget hasn't been well received by markets. France is on the verge of a sovereign debt crisis. We've seen the spread on French bonds really blow out in comparison to those of Germany over the past couple of weeks. What's going on there, investors are worried that the French government doesn't have the political will to really reign in public spending and restore some fiscal discipline. France has been running significant deficits for years now, above 5%. And Parliament in particular, which is badly fractured, just isn't willing to accept the idea that France needs to restrain its spending. In fact, the past two prime ministers that have tried to introduce cuts have been promptly ousted from office. And France and Germany are proposing a new weapon for Europe to fight back against a flood of cheap Chinese goods. The countries are suggesting that the EU lower its bar for blocking Chinese products and allow the block to do so within days. Our reporter in Brussels, Kim McCraill, says the move comes just ahead of a meeting between EU and Chinese trade officials. This comes from a place of several years worth of concern from European businesses and leaders about the flow of low-cost products from China to Europe. So they're essentially proposing two different ways of trying to deal with this issue. One, a really credible response to acts of coercion. So the ability for the EU to easily and quickly put up tariffs in response or other sorts of trade restrictions to retaliate or respond to something concerning that they see from another country. And the second is they propose and they talk about this idea of a diversification instrument. But we know from talking to officials, there's a lot of concern about European companies becoming or already being very dependent on China for particular products, rivers, and permanent magnets, or a really great example of that. And it's already been a problem where China has curtailed exports of those. So the diversification instrument idea is to try to find a way to push European companies to find alternatives and to expand their supply chains beyond being too reliant on one country. Kim added that the new proposal would give the EU a tariff toolkit akin to the US and enable it to impose tariffs on any trading partner, including major economies like China and the US. Coming up, finance editor Alex Francois will join us to break down a pair of major changes to Trump accounts for kids, which may matter to you, even if you didn't sign up. That and more after the break. US stock futures are rising this morning, putting a record for the S&P 500 in play today. The index ended Monday. Just shy of its all-time closing high. The NASDAQ set its own new record yesterday. Futures are pointing to fresh gains for the tech-heavy index as well. Stocks are riding another wave of AI enthusiasm and treasury yields are finally taking a breather after having risen in tandem with stocks in recent weeks. Meanwhile, Brent Crude is trading around $100 a barrel. And those surging energy costs are starting to pinch major economies. New data shows that German factory orders plummeted more than 10% in August, far worse than expected. That sharp drop was driven largely by and around 60% plunge in big ticket orders for items like aircraft ships and military vehicles as elevated production costs weighed on industrial output. Meanwhile, Australian consumer confidence tanked over the past month as households responded to the twin shocks of rising interest rates and ongoing cost of living strains. That extremely weak sentiment is the worst reading since the disastrous recession hit Australia in the early 1990s. Disney is set to face off against the federal- communications commission in a DC court today. It's the latest turn in a major First Amendment clash after Disney's ABC sued the FCC, alleging that its efforts to challenge its broadcast licenses were illegal and amounted to an effort to quash speech that the Trump administration finds unacceptable. For its part, the FCC said the license review isn't about free speech, but rather probing whether Disney's DEI initiatives violated the agency's prohibition on unlawful discrimination. Legal experts say that an eventual ruling could help to determine how the government can wield its regulatory authority over broadcasters. And finally, Blink, and you might have missed some major changes to Trump accounts. We're talking here about the universal child investment vehicles that could be converted into Roth IRAs when kids turn 18 until recently seven million kids had been signed up with the government tossing in a $3,000 for children born between 2025 and 2028. But its finance editor, Alex Francois, explains the formerly opt-in program has undergone some major changes to make it substantially different than the first envisioned, including creating accounts automatically. So the Trump administration basically did a massive auto enrollment last week, adding 60 million under 18s, getting these accounts, which doesn't give the opportunity for people to opt out or not be involved. So, you know, people are scrambling to figure out what it all means, would suddenly do under 18s have in these accounts, and, you know, what can they do with them? The driver around this is the Trump administration wants to create these accounts so that young people's wealth is growing and they're part of the economy. But the enrollment procedure, you know, you had to be savvy, had to know to go do it. Maybe you had to read the Wall Street Journal to know that these things even existed. And so some of the donors who are pushing the administration say, you know, don't make that an obstacle, just auto enroll everybody. And the other big change is that charities controlled by wealthy people with the Treasury Department's approval will be able to put individual stocks into children's accounts and be able to target those donations by age, location, or both. So you have a SpaceX president who's donated a bunch of shares to certain kids and certain income areas. So there's this real targeted thing. The advantage for these rich folks is they get to donate these shares to a foundation. And there's a tax right off there. And then the foundation puts the shares into the accounts. The other thing is the rules stipulate that the account holders have to hold the shares for at least five years. So if you're donating shares in your company, you know, well, I'm donating them. I'm getting this tax relief. And I know no one's going to sell the shares for five years. So that's kind of a benefit for them as well. And they're also able to target, you know, and raise some ethical questions around, well, what if a company wants to build a data center in a particular town? And they say, well, you know, we're going to give all the kids in the town shares. And other questions like what if someone doesn't want to own shares of a company, let's say you don't believe in Tesla or SpaceX or Oracle or whatever it is is donating money, you don't really have a choice. You have to be in there. And then there might be some employees who aren't allowed to own individual shares. The Treasury Department is currently fielding comments on whether it should allow people to opt out of Trump accounts. To read more about the recent changes to the program, check out the link we've left in our show notes. And that's it for what's news for this Tuesday morning. Today's show was produced by Hadi Moyer and Daniel Bach, our supervising producer, is Sandra Killhoff. And I'm Luke Vargas for the Wall Street Journal. We will be back tonight with a new show. And until then, thanks for listening. [MUSIC]