Baltic Dry Index. 1525 +52 Brent Crude 84.37
Spot Gold 2015 US 2 Year Yield 3.79 -0.05
Coronavirus
Cases 01/04/20 World 1,000,000
Deaths 53,103
Coronavirus Cases 06/04/23 World 684,389,855
Deaths 6,834,793
Note: With tomorrow Good Friday ahead of Easter Sunday, the next LIR update will be on Saturday.
With more sign of a looming recession, or more accurately looming stagflation, the stock punters are now betting on the Fed and the other central banksters following India’s lead and pausing interest rate hikes before getting forced into cutting rates later in the year.
Well as strategies go it is a strategy, but it’s not one I’d be willing to bet on.
I think there’s yet more banking trouble to come, more scandal to come out in the cryptocurrency scam, rising trouble in commercial real estate, auto loans and credit card debt. A need to re-price stocks for a coming recession.
India holds rate in surprise move; Asia markets
fall as Wall Street assesses slowing growth
UPDATED THU, APR 6 2023 12:49 AM
EDT
Asia-Pacific markets largely fell on Thursday as
Wall Street digested the latest ADP private payrolls
report, which showed slowing job growth in March.
India’s central
bank held its
policy repo rate at 6.50%, defying expectations to hike 25 basis points. The
Indian Rupee weakened 0.15% shortly after the announcement.
The Nifty 50
gained 0.15% – an outlier as benchmark indexes across the region continued to
see declines.
Japan’s Nikkei 225 led
losses in the region as it slid 1.08% and the Topix lost 0.91%. South Korea’s Kospi fell 0.7%,
and the Kosdaq saw a smaller loss of 0.69%.
The Australian S&P/ASX 200 slipped
0.26%. Hong Kong’s Hang
Seng index was trading marginally up, while the Hang Seng Tech
index was 0.49% lower.
Both Australia and Hong Kong markets will
conclude their trading weeks on Thursday, as their markets will be closed for a
holiday on Friday.
In mainland China, both the Shanghai Composite and Shenzhen Component were
up marginally.
Overnight in the U.S. the Nasdaq Composite recorded
a third straight losing session, shedding 1.07%, while the broad-based S&P 500 dipped
0.25. The Dow Jones Industrial Average,
however, was bolstered by an outperformance by health-care stocks to close
0.24% higher.
Stock
futures are little changed as investors weigh health of job market and economy:
Live updates
UPDATED WED, APR 5 2023 11:08 PM EDT
Stock futures were near flat Wednesday night as
investors considered what the latest data suggested about the health of the
broader economy.
Futures tied to the Dow Jones
Industrial Average lost 12 points, trading near flat. S&P 500 futures
slipped 0.07%, and Nasdaq-100 futures declined 0.13%.
During regular trading Wednesday,
the technology-heavy Nasdaq Composite performed
the worst of the three major indexes, losing nearly 1.1%. The S&P 500 dipped
about 0.3%. The Dow bucked
the trend, rising 0.2% in part because of outperformance from health-care
stocks.
Those moves come as investors
digest the latest data released this week to see if the labor market has shown
signs of weakening. The ADP private payrolls report released
Wednesday showed job growth slowed in March. Meanwhile, a Tuesday report showed
that the number of available positions fell
below 10 million in February — a first in almost two years.
Over the past several months,
investors had cheered signs of economic cooling on the hope that it could push
the Federal Reserve to change course on its interest rate hiking campaign. But
they are now wondering if the central bank has gone too far in its bid to cool
inflation, tightening the economy to the point of an economic slowdown or
recession, said Rob Haworth, senior vice president and senior investment
strategist at U.S. Bank Wealth Management.
“The market is now becoming more
concerned about the ensuing data as opposed to the Fed and trying to pick where
the Fed is going to hit peak interest rates,” Haworth said. “Plenty of the
Street is thinking, ‘Recession, right?’ The market has to start to price for
that, because that’s not where we’re priced, so bad news definitely has to be
bad news.”
Investors will watch Thursday for
jobless claims data for more insights into the strength of the labor market.
St. Louis Fed President James Bullard is also slated to speak in the morning in
Arkansas.
Thursday will cap off a shortened
trading week with the market closed for Good Friday. But investors will still
follow Friday’s data on nonfarm payrolls, the unemployment rate and hourly
wages.
Stock
market today: Live updates (cnbc.com)
Oil
falls as weak US economic data stokes recession fears
April
6, 2023 4:48 AM GMT+1
TOKYO/SINGAPORE, April 6 (Reuters) -
Oil fell on Thursday as weak U.S. economic data raised concerns over a
potential global recession and demand reduction, but benchmark prices were
headed for a weekly advance after OPEC+ announced further output cuts and U.S.
oil stocks dropped.
Brent crude futures
fell 74 cents, or 0.9%, to $84.25 a barrel by 0344 GMT. West Texas Intermediate
U.S. crude slid 73 cents, also 0.9%, to $79.88 a barrel.
Brent and WTI have both gained more
than 5.5% so far this week, headed towards three straight weeks of increase,
after the Organization of the Petroleum Exporting Countries and allies
including Russia, a grouping known as OPEC+, pledged voluntary production cuts.
"Crude oil's
rally paused as it battled the headwinds created by the weak economic data.
This offset more positive fundamentals," ANZ Research said in a note.
The U.S. services sector slowed more than expected in March as
demand cooled, while a measure of prices paid by services businesses fell to
the lowest in nearly three years, giving the Federal Reserve a boost in the
fight against inflation.
----Meanwhile, U.S. job openings in February dropped to
their lowest in nearly two years, suggesting the labour market was cooling. The
slew of soft economic data soured market sentiment, stoking fears of a
recession and prompting investors to adopt risk aversion strategies.
More
Oil
falls as weak US economic data stokes recession fears | Reuters
In global food price inflation news, it doesn’t look likely to end or ease much in 2023. Even with IMF help, how long before Argentina defaults yet again?
Historic drought adds to
Argentina's economic woes
Issued on:
LIMA (Argentina) (AFP) – Argentina's already fragile economy is now taking a beating from nature, as the worst drought in almost 100 years decimates critical soy, wheat and corn production.
Soy and wheat
crops were halved this year, while corn yield was cut by more than a third,
according to official projections, slashing Argentina's exports in a sector
crucial for the public purse.
Adding to
inflation of nearly 100 percent year-on-year and a burdensome debt of $44
billion with the International Monetary Fund (IMF), the drought could not have
come at a worse time for Latin America's third biggest economy.
What's more,
"the true situation will only become clear once the harvesters enter the
fields," agronomist Jaime Mestre told AFP.
With rainfall
50 percent lower than usual, whatever is there to be harvested will likely be
of lower quality.
Lack of water
While in
Washington last week for a meeting with US President Joe Biden, President Alberto
Fernandez pleaded for clemency in the face of the worst drought "since
1929" as the IMF executive board met.
The United
States is the nation with the most voting rights at the IMF, which subsequently
announced a $5.4 billion disbursement to Argentina as part of its loan program.
The IMF
insisted, however, that Argentina needed "a stronger policy package... to
safeguard stability, address setbacks and secure program objectives"
against the backdrop of "an increasingly severe drought, rising inflation
(and) weak reserve coverage."
Rosario
Stock Exchange economist Tomas Rodriguez Zurro estimates the overall loss to
the economy of Argentina's poor grain-growing season will be about $20 billion
-- almost three percentage points of GDP.
In the
agricultural zone of Lima, some 100 kilometers (62 miles) northwest of the
capital Buenos Aires, many of this year's soy crop will simply be left in the
field, added agronomist Jaime Mestre.
Low yield and
poor quality means it is economically unfeasible to even send in the harvester.
The soy
"could not develop due to lack of water and high temperatures,"
Mestre said of the drought that has now lasted three years.
Soy
contributes about $10 billion to the treasury annually -- a major income
generator for Argentina, in the grips of an unusually harsh La Nina weather
cycle.
According to
the Rosario Stock Exchange, the soy sector will have its lowest production
figures in 23 years and generate $7.3 billion less than in 2022.
Mestre said soil moisture
around Lima was down to about five percent -- not enough for planting the next
wheat crop that must go into the ground in just a few weeks' time.
More
Historic drought adds to Argentina's economic woes (france24.com)
Argentina facing
$1.46 billion bill after losing hedge funds' London lawsuit
April 5,
2023
LONDON
(Reuters) - Argentina faces a potential 1.33 billion-euro ($1.46 billion) bill
after losing a lawsuit at London's High Court on Wednesday over payments due on
euro-denominated securities linked to Argentina's gross domestic product in
2013.
Four hedge
funds, holding around 48% of the GDP-linked securities issued between 2005 and
2010, sued the South American republic in 2019, seeking damages of up to 643
million euros.
Palladian
Partners L.P., HBK Master Fund L.P., Hirsh Group LLC and Virtual Emerald
International Limited argued at a hearing in October that Argentina had a
"propensity" to manipulate economic data in order to save billions of
dollars.
Susan
Prevezer, representing the funds, said economic statistics were "the
subject of political direction" in Argentina under former president
Cristina Fernandez de Kirchner, who served from 2007 to 2015.
However,
Argentina's lawyers said that "no rational government deliberately
understates GDP" and pointed out the country had paid nearly $10 billion
to holders of its GDP-linked securities since they were first issued in 2005.
Judge Simon
Picken ruled in the four funds' favour on Wednesday, saying in a written ruling
that Argentina should pay 643 million euros plus interest.
The judge also
ruled that Argentina should pay around 1.33 billion euros in relation to all of
the GDP-linked securities, of which the four funds hold approximately 48%.
Argentina's
lawyer Tamara Oppenheimer said at a brief hearing on Wednesday that the country
is likely to seek permission to appeal against the ruling.
Argentina
facing $1.46 billion bill after losing hedge funds' London lawsuit (msn.com)
Analysis-IMF's lower bar
for Argentina already looks too high
April 5,
2023
LONDON/NEW
YORK (Reuters) - The International Monetary Fund (IMF) has given Argentina
something of break by easing economic targets in its $44 billion loan deal, but
some rosier-than-reality program forecasts may be setting the South American
country up for more failure.
The IMF this
week cut the level of foreign currency reserves Argentina needs to build up by
the end of this year by $1.8 billion, citing a major drought that has hammered
production of top exports soy and corn. It sharply lowered the target for Q1.
But, analysts
pointed to some "optimistic" presumptions in the Washington-based
lender's review of the country, saying that inflation aims, crop production,
fiscal targets and even reserves buildup aims already looked out of Argentina's
reach.
The IMF pegged
2023 inflation at 60% versus most analyst forecasts above 100%. It has trimmed
its outlook for main cash crop soy, but at 45.5 million tonnes soars above
local grains exchanges forecasting a harvest of 25 million to 27 million
tonnes. Its growth forecast at 2% jars with many predicting a contraction.
"In our
assessment, these forecasts are overly optimistic," Sergio Armella at
Goldman Sachs wrote in a report, adding Argentina seemed unlikely to have even
met adjusted reserves and fiscal targets for the recently completed first
quarter.
Armella added
that Argentina, the IMF's biggest debtor, would face rising pressures later in
the year as the country barreled toward elections in October where the
government faces a battle to hold onto power, with poverty levels rising.
"The risk
that authorities deviate further from the program's targets will increase ahead
of the Oct presidential elections and the (primary) elections in the
summer," he said.
---- Argentina - a
serial defaulter which has long battled high inflation, currency weakness and
indebtedness - struck a $57 billion deal with the IMF in 2018 to try and fix
its economic woes. That deal failed and a new program was agreed last year.
However, high
global prices linked to the war in Ukraine and one of Argentina's worst-ever
droughts has hit the country's ability to stabilize its economy and build up
much-needed foreign currency, putting even the new deal under pressure.
"A
commitment to stick to the program ... could become more challenging as the
election approaches," said Stuart Culverhouse, chief economist and head of
fixed income research at Tellimer Research.
"Evidence
of weakening commitment, across the political spectrum, could endanger the
completion of upcoming reviews."
Those reviews
of how Argentina is doing against its economic targets are linked to scheduled
disbursements of funds. Failure to meet the targets could stall the program or
force the IMF to adjust the targets further.
More
Analysis-IMF's
lower bar for Argentina already looks too high (msn.com)
Finally,
”curiouser and curiouser.” The Great Game goes on, but without John Bull or
Uncle Scam! Will somebody please wake up Sleeping Beauty sleepy
Joe Biden!
Top
Saudi, Iranian diplomats to meet in China, say media, officials
April
5, 2023 8:11 AM GMT+1
RIYADH, April 5 (Reuters) - The top
envoys for Saudi Arabia and Iran will meet in Beijing on Thursday, an Iranian
official and a Saudi-owned newspaper said, as the two regional rivals work to
hash out next steps of their diplomatic rapprochement amid a China-brokered
deal.
The meeting between Prince Faisal bin
Farhan Al Saud and his Iranian counterpart, Hossein Amirabdollahian, will be
the first formal meeting between Saudi Arabia and Iran's most senior diplomats
in more than seven years.
After years of hostility that had
fuelled conflicts across the Middle East, Tehran and Riyadh agreed to end their
diplomatic rift and re-open embassies in a major
deal facilitated by China last month.
"The top envoys agreed to meet on
Apr. 6 in Beijing as the deal was facilitated by China," a senior Iranian
official told Reuters.
Choosing China "came as an
extension of Beijing's positive role in reaching the agreement and facilitating
communication between the two countries," Saudi-owned Asharq al-Awasat
newspaper cited an unidentified source in Riyadh as saying.
The resumption of the relations that
was announced last month and arrangements for the exchange of ambassadors will
be discussed in the meeting, it added.
Beijing's secret role in the
breakthrough between Tehran and Riyadh shook up dynamics in the Middle East,
where the United States was for decades the main mediator, flexing its security
and diplomatic muscles.
"The era of the United States'
involvement in this region is over ... The regional countries are capable of
preserving security and stability in the Middle East without Washington's
interference," another Iranian official said.
"The next steps will be discussed
in the Beijing meeting, such as re-opening of the embassies and appointing
ambassadors."
Saudi Arabia cut ties with Iran in 2016
after its embassy in Tehran was stormed during a dispute between the two
countries over Riyadh's execution of a Shi'ite Muslim cleric. The kingdom
subsequently asked Iranian diplomats to leave within 48 hours while it evacuated
its embassy staff from Teheran.
The relationship had worsened since
2015, after Saudi Arabia and the United Arab Emirates intervened in the Yemen
war, where the Iran-aligned Houthi movement ousted a Saudi-backed government
and took over the capital Sanaa.
For Saudi Arabia, the deal could mean
improved security. The kingdom has blamed Iran for arming the Houthis who
carried out missile and drone attacks on its cities and oil facilities.
In 2019, Riyadh blamed a massive attack
on Aramco oil facilities, which knocked out half of its oil output, directly on
the Islamic Republic.
Tehran denied those allegations.
Top Saudi, Iranian diplomats to meet in China, say media, officials | 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.
Hmm,
so the banksters are going to minimise “multi-billion euro loan portfolio” risk
by entering into dodgy derivatives risk. Well, if they say so, I suppose, but
how well did that turn out for AIG?
Exclusive:
Europe's banks ramp up bespoke loan trades to reduce risk
April 5, 2023 6:23 AM GMT+1
April 5 (Reuters) - European banks are
increasingly turning to bespoke deals with investors such as hedge funds to
offload some of the risk on multi-billion euro loan portfolios and improve their
financial strength, several sources involved told Reuters.
Banks supervised by the European
Central Bank (ECB), the biggest ones in the euro zone, completed a record 174
billion euros ($189 billion) of such deals last year, the regulator told
Reuters.
These "significant risk
transfer" (SRT) transactions are not new, but because they are usually
bilateral and private, data on them is not public and their terms are closely
guarded.
By offloading some of the risk on their
loans, the banks can significantly reduce how much capital they need to set
aside to cover potential losses, according to law firm Clifford Chance.
Unlike a traditional securitisation, in
which a bank's assets are moved to a separate entity that then sells securities
to investors, SRTs are often "synthetic" and mimic a sale.
A bank can normally transfer risks of
losses equivalent to around 7% to 12% of a loan portfolio, two market sources
said.
The attraction for the investor is a
less volatile return than on many publicly-traded fixed income assets, and
depending on the quality of the loan pool, higher rewards in the form of a
coupon for the protection they provide to the bank.
"Investor interest has
widened," said Jason Marlow, managing director in Barclays' corporate loan
portfolio management team.
Marlow said banks that had in the past
used SRTs once every three years could now deploy them "once or even
multiple times" a year to free up credit lines that may be used for
further lending in an increasingly capital-constrained environment.
With synthetic structures, a bank
transfers the risk via credit derivatives or guarantees but keeps holding the
underlying exposures.
To minimize the risk the bank would
face were the investor unable to make good on its part of the trade, cash
collateral is posted to cover the potential losses whose risk has been
transferred, which market sources say is key for the bank to obtain the capital
relief from the regulator.
The ECB, which directly oversees the
most significant banks in the euro zone, told Reuters that the bulk of the
transactions in 2022 involved loans that are still performing, a change from
2021 when soured loans made up more than a third of such trades.
More
Exclusive: Europe's banks ramp up bespoke loan trades
to reduce risk | Reuters
Polish agriculture
minister resigns amid anger over Ukrainian grain imports
April 5, 2023
WARSAW (Reuters) - Polish Agriculture Minister Henryk Kowalczyk resigned
from his post on Wednesday amid rising anger among farmers over the impact of
Ukrainian grain imports on prices.
Kowalczyk said he decided to quit the
position due to the European Commission's decision to extend duty free imports
for Ukrainain grain until June 2024. Polish farmers had called for the
introduction of tariffs.
"As it is clear that this demand
will not be met by the European Commission at this point, I decided to resign
from the post of agriculture minister," Kowalczk said.
Logistical bottlenecks mean large
quantities of Ukrainian grains, which are cheaper than those produced in the
European Union have ended up in Central European states, hitting prices and
sales of local farmers and creating a headache for Poland's ruling nationalists
law and Justice (PiS) in an election year.
The prime ministers of five states
including Poland wrote to European Commission President Ursula von der Leyen on
Friday to demand action on Ukrainian agricultural imports.
They said tariffs may have to be
reintroduced if the influx of grain and other products from Ukraine cannot be
stopped by other means.
Polish agriculture
minister resigns amid anger over Ukrainian grain imports (msn.com)
Joseph J. Cassano, a former A.I.G. executive, August 2007, on Credit
Default Swaps that wiped out A.I.G in 2008.
Covid-19 Corner
This section will continue until it becomes unneeded.
No
update today. More on Saturday.
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.
Today, something different. The global
anti-China trade war is going up a gear.
China
urges stronger WTO monitoring of US-led chip export curbs
April
5, 2023 7:42 AM GMT+1
April 5 (Reuters) - China has urged the
World Trade Organization to scrutinise US-led technology export restrictions
aimed at curbing its ability to make advanced chips, state television said on
Wednesday.
Chinese representatives told a WTO
meeting this week that Japan, the Netherlands and the United States should
report their plans and subsequent measures to the body, which it urged to step
up supervision on the matter, broadcaster CCTV said.
A Geneva-based trade official confirmed
that China raised the issue and asked the WTO to strengthen its monitoring of
the measures during a tense two-day meeting of its Council for Trade in Goods.
The US has previously said its actions
relate to national security grounds and should not be subject to review by the
WTO.
Last week, without specifying China as
the target, Japan said it would restrict export
of 23 types of semiconductor manufacturing equipment, a move in line with
Washington's curbs announced last October.
That came after the Netherlands said
last month that it also planned to limit similar exports, such as those from
ASML Holding NV (ASML.AS), which dominates the market for lithography
systems used to create chips' minute circuitry.
The move of the three nations in
alignment to curb chip exports to China "violates the fairness and
transparency principles of WTO", CCTV said.
The state broadcaster gave no details
of any WTO response to China's remarks.
China responded to the US measures last
year with a WTO complaint saying the US actions were inconsistent with articles
governing trade between member nations, a dispute record on the WTO's website
shows.
At the time, Washington said the
measures concerned issues of national security "not susceptible to review
or capable of resolution" by WTO dispute settlement.
China urges stronger WTO monitoring of US-led chip
export curbs | Reuters
If economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid.
John Maynard Keynes.
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