Baltic Dry Index. 1456 -56 Brent Crude 75.94
Spot Gold 1970 US 2 Year Yield 3.96 -0.21
Coronavirus
Cases 01/04/20 World 1,000,000
Deaths 53,103
Coronavirus Cases 23/03/23 World 682,891,877
Deaths 6,822,515
"I'll gladly pay you Tuesday for a hamburger today".
Fed Chairman Powell, with apologies to J. Wellington Wimpy.
Not much need for any input from me today. US Treasury Secretary Yellen said it all. No universal bank deposit guarantee of any size is under consideration. And with that, US regional and community banks can expect a run on deposits.
The carefully chosen guidance from Fed Chairman Powell meant nothing. US banking crisis two is likely to get underway. Which banks will fail this coming weekend.
Her words pretty much killed off any interest in buying Alternative Tier 1 bonds too. With bank deposit runs to come, why buy bonds of mutual assured destruction as more banks fail over the coming weeks and months.
All eyes will be on today’s Bank of England meeting . After yesterday’s UK inflation figure rising to 10.4 percent in February, the choice facing the Old Lady of Threadneedle Street is a 25 point rate hike or a 50 point rate hike, matching last week’s ECB rate hike of 50 points.
My apologies for today’s update length.
Asia markets
mixed after Fed’s rate hike, Yellen says no plans to insure bank deposits
UPDATED THU, MAR 23 2023 1:20 AM EDT
Asia-Pacific markets were mixed on Thursday,
following Wall Street’s reaction overnight after the U.S. Federal Reserve hiked
rates by another 25 basis points. Regional bank stocks in the U.S.
also fell after Treasury Secretary Janet Yellen said in response to a question
that officials are not
considering a ‘blanket insurance’ for bank deposits.
Australia’s S&P/ASX 200 was
down 0.61% to close at 6,972.5. In Japan, the Nikkei 225 shed
0.21%, and the Topix slid 0.37%.
Hong Kong’s Hang Seng index led
gains in Asia, up 0.85% and the Hang Seng Tech index was up 1.96%, mainly due
to gains by tech giant Tencent.
In mainland China, the Shenzhen Component was
up 0.5% and the Shanghai Composite fell
marginally.
South Korea’s Kospi was up 0.14%,
with the Kosdaq seeing a larger gain of 1.02%.
Asia
markets mixed after Fed raises rates (cnbc.com)
‘Blanket
insurance’ of bank deposits is not being discussed, Yellen tells senators
WASHINGTON — Federal
bank regulators are not considering any plans to insure all U.S. bank deposits
without congressional approval, Treasury Secretary Janet Yellen told members of
a Senate Appropriations subcommittee on Wednesday.
Several banking
groups and consumer advocates have called for some kind of a universal deposit
guarantee after the government refunded most of the uninsured deposits at two
banks that collapsed earlier this month, California-based Silicon Valley Bank
and New York-based Signature Bank.
In response to a direct
question about whether Treasury would circumvent Congress to insure all
deposits, Yellen replied: “I have not considered or discussed anything having
to do with blanket insurance or guarantees of all deposits.”
Yellen made the comment to senators during a
hearing on Capitol Hill to consider the Treasury Department’s 2024 budget
request.
The statement fueled a decline in
the stock market, and a
drop in regional bank shares.
Congress has broad authority over
the FDIC insurance limit, currently set at $250,000 as part of the Dodd-Frank financial
reforms. Congress can also temporarily suspend the limit, like it
did in 2020 as part of the government’s response to Covid-19.
This time around, only a handful of Democrats have openly suggested Congress consider
raising the limit across all deposits. An influential bloc of House
Republicans, meanwhile, has already come out against any hike. This
makes it difficult to envision how a bill to raise the limit would pass the
GOP-controlled House.
More
SVB
collapse: Yellen says blanket bank deposit insurance not discussed (cnbc.com)
Wall
St ends sharply lower as Powell warns inflation fight continues
March
22, 2023 10:53 PM GMT
NEW YORK, March
22 (Reuters) - Wall Street gyrated to end sharply lower on Wednesday after the
U.S. Federal Reserve delivered a widely expected 25 basis point policy hike,
while hinting that it was on the verge of pausing future increases in view of
recent turmoil in the financial sector.
The three major
U.S. stock indexes, which were mostly directionless prior to the Fed announcement,
jumped higher then deflated as investors digested the accompanying statement
and Chair Jerome Powell's subsequent Q&A session.
By closing bell,
all three indexes were off more than 1.6%.
"The market
was encouraged when it heard that the Fed had considered pausing completely and
then it was disappointed when Powell clarified that their hands weren’t tied
and that they can keep raising rates if they need to," said Chris
Zaccarelli, chief investment officer at Independent Advisor Alliance in
Charlotte, North Carolina.
In the
Fed's statement, the
members of the Federal Open Markets Committee (FOMC) said some additional
tightening might be possible, but suggested it was on the verge of pausing
future hikes in view of recent turmoil in the financial sector.
Gains pared during Powell's
remarks and Q&A session in which he vowed to use all available tools to
keep the banking system sound, but reiterated the central bank's commitment to
reining in inflation.
---- Worries persist that
the Fed's aggressive battle against inflation could tip the economy into
recession, and recent
turmoil in the banking sector, sparked by failures of SVB
Financial Group (SIVB.O) and Signature Bank (SBNY.O),
have exacerbated those fears.
The sell-off was
exacerbated by Treasury Secretary Janet Yellen's remarks before
lawmakers that the Federal Deposit Insurance Corporation (FDIC) was not
considering "blanket insurance" for deposits arising from recent
strife in the sector.
The Dow Jones
Industrial Average (.DJI) fell
530.49 points, or 1.63%, to 32,030.11, the S&P 500 (.SPX) lost
65.9 points, or 1.65%, to 3,936.97 and the Nasdaq Composite (.IXIC) dropped
190.15 points, or 1.6%, to 11,669.96.
All 11 major
sectors of the S&P 500 ended the session deep in negative territory, with
real estate (.SPLRCR) suffering
the steepest percentage drop, its largest one-day plunge since Sept. 13.
The banking
sector reversed course after a two-session rebound, with the S&P Banks
index (.SPXBK) and
the KBW Regional Bank index (.KRX) off
3.7% and 5.3%, respectively.
Shares of First
Republic slipped 15.5 % in volatile trade amid worries that it may need to
downsize or seek government support.
Pacific Western
Bank (PACW.O) announced it
had raised $1.4 billion from investment firm Atlas SP Partners. Its shares
dropped 17.1 %.
Western Alliance
Bancorp (WAL.N) fell
5.0 %.
More
Wall St ends
sharply lower as Powell warns inflation fight continues | Reuters
Wells Fargo lists financial instability as
biggest economic risk post-Fed decision.
PUBLISHED WED, MAR 22 2023 9:00
PM EDT
A major Wall Street firm is ranking financial
instability over inflation as the biggest economic risk for the next three
months.
In an interview following the Federal Reserve’s quarter point interest rate hike, Wells Fargo Securities’ Michael Schumacher suggested
policymakers are underestimating how quickly tightening credit conditions could
hurt the economy.
“The Fed is not really giving enough credence to the idea that tighter
credit means things weaken in a fairly quick manner,” the firm’s head of macro
strategy told CNBC’s “Fast Money” on Wednesday.
He estimates it will take a month or two to get
clarity on credit conditions.
“It’s hard to say right now whether the Fed has
tightened enough or too much,” said Schumacher. “That’s why the market has been
bouncing around so much —whether it’s the equity market or the bond market.
People are trying to get a read on this.”
On Wednesday, stocks closed at their lows for the session. The Dow fell 530 points, breaking a two-day win streak.
The S&P 500 and
tech-heavy Nasdaq also
closed lower.
As long as the financial sector can avoid another
meltdown, Schumacher believes the Fed will hold interest rates higher for
longer because inflation is still too
high.
More
Financial instability as biggest market risk: Wells
Fargo (cnbc.com)
Andrew Bailey warns
of ‘moral hazard’ after US bailout of SVB customers
March 22, 2023
Andrew
Bailey has criticised the US government’s decision to bail out Silicon Valley
Bank (SVB)’s depositors, saying the blanket guarantee increased the risk of
“moral hazard” in the banking industry.
In a letter to the chairman
of the Treasury committee, the Bank of England governor criticised the Federal
Reserve and the US Treasury department for protecting all depositors at the
failed lender.
He said: “A blanket guarantee
of all depositors is not costless. It reduces the risk sensitivity of a bank’s
funding, could result in moral hazard, and any costs would ultimately need to
be borne by the taxpayer.”
Moral hazard is the fear that
banks and investors will take large risks if they believe they will be
protected from any potential consequences if things go wrong.
Mr Bailey contrasted the US’s
blanket guarantee for SVB depositors with the Financial Services Compensation
Scheme in Britain, which protects customer deposits only up to £85,000.
He said: “The UK deposit
guarantee limit is set at a level which balances financial stability, moral
hazard, and adequate depositor protection.”
On Tuesday, Janet Yellen, the
US Treasury secretary, signalled that the US government could extend support to other smaller
lenders in a bid to shore up
confidence in the country’s banking system.
Mr Bailey’s comments add to a growing tension between Europe’s financial regulators and US
counterparts, following a string of recent regional bank collapses.
European
officials believe they are unfairly suffering from the consequences of a
failure to properly regulate the US banking system. Swiss officials
specifically highlighted the crisis in the US as a key cause of the near
collapse of Credit Suisse.
Earlier
this month Rishi Sunak, Jeremy Hunt and Mr Bailey were forced to engineer
a late-night sale of SVB’s UK subsidiary to HSBC for £1, rather
than bailing out its depositors.
HSBC
was given an exemption from rules that do not allow complicated corporate
customers to be housed within ring-fenced banks to get the deal over the line.
Ring-fencing
requires banks to separate their retail banks from their investment and
international banking activities. The rules were introduced as a response to
the financial crisis to stop the blowups within investment banks hurting retail
customers.
In a
separate letter to Treasury committee chair Harriett Baldwin, Andrew Griffith,
the City minister, said the ring-fencing exemption “was crucial for the success
of HSBC acquiring SVB UK. It ensured that HSBC’s ring-fenced bank was able to
provide liquidity support to its new subsidiary. This should facilitate the
smooth operation of SVB UK going forward”.
HSBC
pledged to inject £2bn into SVB UK to ensure that business-as-usual continued.
More
Andrew Bailey
warns of ‘moral hazard’ after US bailout of SVB customers (msn.com)
Credit Suisse fallout
threatens to halt issuance of risky bank debt
March 22, 2023
The wipeout of $17bn of Credit Suisse bonds has thrown into question
further issuance in the market for risky bank debt, with some of Asia’s biggest
banks considering pausing sales.
Major
banks in Japan, Singapore and Hong Kong are placing new additional tier 1 (AT1) bond deals on hold until market
conditions stabilise, according to people familiar with the plans.
The
hiatus follows three days of turmoil triggered by the decision to write down the value of Credit Suisse’s AT1 bond to
zero as part of the bank’s takeover by Swiss rival UBS, while shareholders
received $3.25bn. AT1s are a class of debt designed to take losses when
institutions run into trouble but are generally believed to rank ahead of
equity on the balance sheet.
Regulators
in the eurozone, UK and Hong Kong have stressed that they will not follow Swiss authorities in upsetting the
usual hierarchy of bank creditors.
Even
so, prices in the $260bn AT1 market have tumbled this week. Analysts and
investors have warned that buyers are likely to demand substantially higher
borrowing costs, potentially creating a “zombie market” where banks are
reluctant to issue fresh debt to refinance older bonds.
“There is no point for Asian banks to issue at such elevated yield
levels, but I do expect the fundamentally stronger ones to come back to issue
AT1s when the market stabilises,” said Nicholas Yap, head of Asia credit desk
analysts at Nomura.
MUFG and SMFG, two of the three banks responsible for
the lion’s share of AT1 issuance, were expected to issue AT1 bonds in April and
were already sounding out investor appetite when the crisis at Credit
Suisse erupted.
People with knowledge of the planned sales say the
banks may now have to adjust their terms or pause the issuance depending on how
badly investor sentiment has been hurt by the wipeout at the Swiss bank.
Bond traders said the pipeline for new AT1 issuance
in Hong Kong was now empty, and was unlikely to restart until the second half
of the year.
The fallout
from the Credit Suisse deal “changes the whole nature of the [AT1] market, and
I think the ability to issue going forward is probably close to zero”, said
Greg Peters, co-chief investment officer of PGIM Fixed Income. “Basically, it’s
a zombie market going forward in my mind.”
AT1s were
designed in the wake of the 2008-09 financial crisis as a way for bondholders
to shoulder a greater portion of the losses at failing banks and avoid
taxpayer-funded bailouts. The bonds are perpetual and have no pre-determined
maturity, although they are typically repaid once an initial “non-call” period
expires and refinanced with fresh issuance. Investors value the flexibility of
getting their money back and choosing whether to buy new bonds.
Part of the
reason for the fall in prices is that investors are factoring the “extension
risk” of banks not calling their bonds, according to Lotfi Karoui, chief credit
strategist at Goldman Sachs.
UniCredit,
Crédit Agricole and Barclays are among the European banks with “call” dates
this year. But looking at the broader AT1 market, “2023 is relatively on the
benign side”, said Karoui, with “no imminent refinancing needs”.
More
Credit Suisse
fallout threatens to halt issuance of risky bank debt (msn.com)
Finally, yet more sign of a global slowdown occurring.
How long do we have before it’s a global recession?
Pessimism
persists at big Japanese manufacturers amid global slowdown
March
22, 2023 11:06 PM GMT
TOKYO, March 23 (Reuters) - Big
Japanese manufacturers remained pessimistic about business conditions for a
third straight month in March, the closely watched Reuters Tankan survey
showed, reflecting worry about slowing global growth that could hurt the country's
export engine.
Service-sector
firms' mood rebounded in a sign of domestic demand-driven recovery, in which
the prospects of higher wages among big firms at the spring labour talks may
encourage households to spend their way out of the COVID-induced doldrums.
The mixed results underscored the
fragility of the world's No.3 economy as exports slow and private consumption,
that accounts for more than half the economy, lacks momentum.
The Reuters Tankan,
designed to closely track the Bank of Japan's key quarterly tankan survey,
suggested the central bank's survey due next April 3 will likely show
deterioration in business confidence at big manufacturers.
Problems at some
western banks added to risks to external demand that already faces the impact
of global tightening and a slowdown in China, Japan's biggest trading partner,
while a weak yen boosts import costs of commodity-driven inflation.
More
Pessimism
persists at big Japanese manufacturers amid global slowdown | Reuters
Column:
Global freight slump deepens at the start of 2023
March 21, 2023 4:43 PM GMT
LONDON, March 21 (Reuters) -
Global freight movements continued to dwindle in the first two months of 2023
as manufacturers and distributors struggled to reduce excess inventories and
cope with rising interest rates and increased caution among buyers.
Container flows fell further in
January and February compared with the same months a year earlier, showing the
inventory-liquidation cycle was not over yet:
- Singapore’s seaborne container shipments were
down 6% in February compared with a year earlier, one of the steepest
falls since the first wave of the pandemic.
- Japan’s air cargo through Narita airport, used
for higher-value and more time-sensitive merchandise, was down 33% in
January after a 24% year-on-year drop in December.
- London’s Heathrow handled 6% less air cargo in
January than a year earlier after moving 11% less in December.
In response, freight rates have
slumped to the lowest level since the first wave of the pandemic, which peaked
in April and May 2020, as volumes have shrivelled and excess capacity has
emerged.
In the spot market, the cost of moving
a box from China to the West Coast of the United States by sea has tumbled to
just over $1,000 per forty-foot equivalent unit (FEU) down from almost $16,000
a year ago.
The spot rate from China to North
Europe has fallen to less than $1,400 per FEU from almost $14,000 a year ago,
based on the Freightos Baltic Exchange index.
Most shipping containers are moved
onwards inland by road or rail so there has also been a sharp drop in the
number of units transferred.
In the United States, the number of
containers hauled on the major railroads in the first 10 weeks of 2023 was down
by 9% compared with the same period in 2022.
Chartbook: Global container freight
Some of the drop in freight has been
driven by the rotation back to spending on hospitality, travel, leisure and
other services and away from merchandise after the pandemic.
The extent of that reversal has caught
manufacturers and retailers by surprise and left them holding an enormous
volume of excess raw materials, work-in-progress and unsold products.
More recently, persistent inflation,
rising interest rates and a darkening economic outlook have begun to weigh on
sales of expensive, interest-sensitive items such as vehicles, computers and
housing-related products.
More
Column: Global freight slump deepens at the start of 2023 | Reuters
Global Inflation/Stagflation/Recession Watch.
Given
our Magic Money Tree central banksters and our spendthrift politicians,
inflation now needs an entire section of its own.
Inflation rises to
10.4% in surprise reversal of recent trend
March 22, 2023
Inflation rose
to 10.4 per cent in February up from 10.1 per cent in January in a suprise
reversal of a recent downward trend.
The upward push is a result
of food and non-alcoholic drink prices reaching their highest rate in more than
45 years. It may also force the Bank of England to
raise interest rates higher
to slow price growth as a result.
ONS chief
economist Grant Fitzner said: "Inflation ticked up in February, mainly
driven by rising alcohol prices in pubs and restaurants following discounting
in January.
“Food and non-alcoholic drink
prices rose to their highest rate in over 45 years with particular increases
for some salad and vegetable items as high energy costs and bad weather across
parts of Europe led to shortages and rationing.
“These were partially offset
by falls in the cost of motor fuel, where the annual inflation rate has eased
for seven consecutive months."
It is the first rise in
inflation since October 2022, and leaves price rises a long way from the Bank
of England’s goal of 2 per cent. In addition, the rise makes Chancellor Jeremy Hunt’s
announcement that inflation was expected to fall to 2.9% by the end of the year
appear less llikely.
“Falling inflation isn’t
inevitable, so we need to stick to our plan to halve it this year,” Hunt said.
---- The price of a
basket of commonly bought goods was 10.4 per cent higher in February than it
was a year earlier, well ahead of City expectations 9.9 per cent. Core
inflation - which removes the more volatile food and energy prices - also
increased, to 6.2%, a rise that Capital Economics chief UK economist Paul Dales
called “more worrying”.
“These inflation figures smell a
little like the recent US experience, where it appeared that core inflation was
easing rapidly a few months ago only for it to accelerate again as economic
activity proved resilient,” he said.
Alpesh Paleja, lead economist at the
Confederation of British Industry, did note that there was more reason for
positivity looking ahead, as energy prices are expected to decrease.
“While inflation rose in February,
the outlook for the months ahead is looking more benign, thanks to lower
wholesale energy prices,” Paleja said. “But while we expect inflation to fall
back over this year, the firmness in domestic price pressures is something that
the Bank of England will be keeping a close eye on.”
“And despite further falls over the coming months, this year
will still be a high-inflation environment for both households and businesses.”
The
higher-than-expected figure - combined with fears about the banking sector
easing in the last two days - could encourage the Bank of England to be more
hawkish in raising interest rates.
The
Bank will announce whether it will raise rates again on Thursday, with expert opinions on whether it should do so divided earlier
this week as its two core objectives came into conflict.
More
Inflation rises to 10.4% in surprise reversal of
recent trend (msn.com)
Milk,
meat and fruit worst affected as supermarket groceries DOUBLED in cost over
last year, Which? says
WEDNESDAY 22 MARCH 2023 7:43
AM
The cost of some
everyday groceries has more than doubled over the last year, consumer brand
Which? has found.
The company
analysed inflation on more than 25,000 food and drink products at eight
major supermarkets – Aldi, Asda, Lidl, Morrisons, Ocado, Sainsbury’s,
Tesco and Waitrose.
Which? looked at
the average price of the products in the three months to the end of February
2023 compared to the same time period last year.
This comes as
the UK reported that inflation had now topped 10.4 per cent,
smashing expectations from the Bank of England and City analysts.
Data revealed that
prices increased most at Lidl, followed by Aldi, Asda, Morrisons, Waitrose,
Sainsbury’s, Tesco and then Ocado.
Which? found a range
of everyday items – including milk, meat and fruit – on each supermarket’s list
of groceries with the highest inflation.
The company said own-brand
products were particularly hard-hit and also featured heavily on lists.
The findings showed
that budget and own-brand items were subject to higher rates of inflation than
premium and branded counterparts overall.
Annual
inflation of popular food and drink was found to be at 16.5 per cent across the
eight retailers in February. In particular, inflation on vegetables, juice
drinks, smoothies and cereal rose.
More
Covid-19 Corner
This section will continue until it becomes unneeded.
Today, a Norwegian vaccine to excess deaths correlation study, explained by Dr. John Campbell. The slam dunk? Approx. 15 minutes.
Correlation study
Some other useful Covid links.
Johns Hopkins Coronavirus
resource centre
https://coronavirus.jhu.edu/map.html
Centers for Disease Control
Coronavirus
https://www.cdc.gov/coronavirus/2019-ncov/index.html
The
Spectator Covid-19
data tracker (UK)
https://data.spectator.co.uk/city/national
Technology
Update.
With events happening fast in the
development of solar power and graphene, among other things, I’ve added this
section. Updates as they get reported.
Solar Industry Feeling the Heat Over Disposal of 80
Million Panels
Mar 21 2023
The renewable
energy sector is facing a quandary: how Australia will dispose of 80 million
solar panels in an environmentally friendly way when they reach the end of
their life.
Paradoxically, one of the reasons
people are installing solar photovoltaic (PV) panels in huge numbers is to help
the environment, but the industry is now grappling with the anticipated waste
generated by 100,000 tonnes of panels due to be dismantled in Australia from
2035.
A new study led by the University of South Australia has proposed a
comprehensive product stewardship scheme for solar panels, which was
prioritised by the Federal Government several years ago.
In a paper published in AIMS Energy, UniSA researcher
Professor Peter Majewski says incentives are needed for producers to design
solar panels that can be more easily recycled if they are damaged or out of
warranty.
“Australia has one of the highest
uptakes of solar panels in the world, which is outstanding, but little thought
has been given to the significant volume of panels ending up in landfill 20
years down the track when they need to be replaced,” Prof Majewski says.
“There are some simple recycling
steps that can be taken to reduce the waste volume, including removing the
panels’ frames, glass covers and solar connectors before they are disposed of.
“Landfill bans are already in place in Victoria, following the lead of
some European countries, encouraging existing installers to start thinking
about recyclable materials when making the panels.”
Prof Majewski says landfill bans are
a powerful tool but require legislation that ensures waste is not just diverted
to other locations with less stringent regulations.
Serial numbers that can track a
history of solar panels could also monitor their recycling use and ensure they
are disposed of in an environmentally friendly way.
“Several European
nations have legislation in place for electric car manufacturers to ensure they
are using materials that allow 85 per cent of the car to be recycled at the end
of their life. Something similar could be legislated for solar panels.”
Weatherproof polymers used in solar panels pose
environmental risks, releasing harmful hydro-fluorite gas when incinerated.
Exposure to the gas can severely irritate and burn the eyes, causing headaches,
nausea, and pulmonary edema in the worst cases, sometimes leaving permanent
damage.
More
Solar Industry
Feeling the Heat Over Disposal of 80 Million Panels (azocleantech.com)
"The history of paper money is an account of abuse, mismanagement, and financial disaster."
Richard M. Ebeling.
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