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Executive Summary
It were two politics intensive weeks since the last Summary, containing mainly the Russia - Ukraine conflict, the Corona outbreak in China, and evolving inflation. All had more or less rising prices (mostly energy) as the common denominator.
The conflict in the Ukraine seems to cool down for the moment although most observers put it as the calm before the storm.
The Corona outbreak in major cities China’s are leading to unrest due to insufficient supplies for the residents. According to some interpretations, the opening of some neighbourhoods within cities having a lockdown is seen as a slight easing in China’s hard covid strategy.
As energy prices are mostly pointed out to be the main driver behind the recent surge in inflation, much political news was on actions to release supply pressure. Energy costs could end up in second round effects, which is why upcoming economic reports on inflation should be examined in the light of a release in energy inflation and a not too strong increase in core, especially service-related, inflation.US equities were very weak, the large Europe indices following. Southern Europe indices were only slightly lower. So was China, South America and Australia. Technology and consumer discretionary had large down movements, while health care and consumer staples outperformed. Bond yields are mostly up, the US yield curve steepened. Metals are mixed, with copper selling off. Oil was weaker but natural gas up considerably. Agriculture futures mostly up. Almost all major currencies were weaker against the dollar.
In the upcoming week, many inflation related economic reports are released. Those, next to news on the Bank of Japan, which is the only more to the dovish side leaning central bank in the developed markets, and news on the french election, should drive the market.
Economics
ING Economics 11.04.2022
(There are) recent market rumours that the ECB is working on a new programme to tackle the unwarranted widening of bond yield spreads.
Shoppers are buying staples in smaller quantities, switching to cheaper, store-name brands and more rigorously hunting for deals. The shift is especially pronounced among lower-income consumers who splurged on household products amid the heights of the pandemic, analysts say. -- WSJ 2022-04-07
US Feb Consumer Credit Increased $41.9B Jan Consumer Credit Revised To Up $8.9B From Up $6.8B -- Twitter from 2022-04-07
Politics
SHANGHAI, April 11 (Reuters) - China's financial centre of Shanghai will start easing lockdown in some areas from Monday, despite reporting a record of more than 25,000 new COVID-19 infections, as authorities strive to get the city moving again after more than two weeks. -- Reuters 11.04.2022
Shanghai is grouping residential units into three risk categories as a step towards allowing "appropriate activity" by those in neighbourhoods with no positive cases during a two-week stretch, city official Gu Honghui said.
As in 2017, Emmanuel Macron (27.6%) and Marine Le Pen (23.4%) are the two winners of the first round of the French presidential elections and will face each other in the second round on 24 April. The far-left candidate Jean-Luc Mélenchon was third and quite close (22% of the vote). In fourth place is the far-right polemicist Eric Zemmour with 7% of the vote. — ING Economics 11.04.2022
Zemmour has already instructed his voters to vote for Le Pen, and with 30% of the vote for Zemmour and Le Pen together, the far-right has never been so powerful in France. Moreover, Le Pen's image is very different from the one she had in 2017. She seems much less extreme and more acceptable to a large part of the French population.
According to the polls, Emmanuel Macron has a very small lead, with between 54% and 51% of voting intentions (i.e. 12 to 15 points less than his score in 2017).
BRICS TO CREATE THEIR OWN FINANCIAL MESSAGING SYSTEM || INDEPENDENT RATING AGENCY FOR BRICS WILL BE APPOINTED || BRICS TO ACCELERATE WORK ON THEIR OWN PAYMENT CARDS - SILUANOV -- Twitter from 2022-04-09
CHINA IS SPEEDING UP NUCLEAR BUILD-UP ON FEARS OF US CONFLICT - WSJ. -- Twitter from 2022-04-09
Nato member states have agreed to supply new types of advanced weaponry to Ukraine, alliance representatives said, as Kyiv prepares for an offensive by Russia in the country’s east. -- FT 2022-04-08
Dmitry Peskov, Putin’s spokesperson, admitted Russia had suffered “significant losses of troops” during its invasion of Ukraine, which he described as “a huge tragedy for us”.
Liz Truss, UK foreign secretary: "We agreed to help Ukrainian forces move from their Soviet-era equipment to Nato standard equipment, on a bilateral basis.”
Ninety-three UN members approved Russia’s suspension — the first imposed on any permanent member of the UN Security Council. However, 24 UN members, including China, Iran, Bolivia and Kazakhstan, voted against Russia’s suspension. Another 58 countries abstained, including India, Indonesia and Egypt, showing that a wide range of nations have sided with Moscow or sought to remain neutral in the conflict.
GERMAN PRESIDENT STEINMEIER CALLS FOR WAR CRIMES TRIBUNAL AGAINST PUTIN AND LAVROV - SPIEGEL -- Twitter from 2022-04-08
GERMAN HEALTH MINISTER SAYS IT'S UNLIKELY THAT WE WILL NOT HAVE A NEW COVID-19 INFECTION WAVE IN AUTUMN -- Twitter from 2022-04-08
UK has detected a new Covid variant. Here’s what we know so far about omicron XE cnb.cx/3r5Cg0K -- Twitter 2022-04-07
GERMANY’S CHANCELLOR SCHOLZ: NO PLANS HAVE BEEN MADE TO POSTPONE THE NUCLEAR EXIT. -- Twitter 2022-04-07
GERMANY’S CHANCELLOR SCHOLZ: NO MATTER WHAT HAPPENS, NATO WILL NOT BECOME A PARTY TO THIS WAR. -- Twitter 2022-04-07
Monetary Policy
SCHOLZ SAYS I BELIEVE THAT PHASE OF GLOBALISATION IS ENDING IN WHICH EVERYTHING WAS VERY CHEAP -- Twitter 2022-04-07
ECB'S LANE SAYS CAN'T RESPOND TO CURRENT HIGH INFLATION, ORIENTATION IS MEDIUM TERM ECB'S LANE SAYS IMPORTANT NOT TO OVERREACT TO SURGE IN INFALTION -- Twitter 2022-04-06
Markets
In the United States, used car prices have declined for two months in a row. Taiwan Semiconductor stated it is seeing softening demand for smartphones, PCs and TVs in China. (…) We agree that growth will slow, especially in the housing market and durable goods sectors. (…) Broad equity markets tend to do well after the yield curve inverts (average returns of 20% to 25% between inversion and the eventual peak in stocks), and we don’t have a compelling reason to think this experience would be different. Within equities, we are more focused on sectors that could provide more consistent cash flows (such as healthcare) and sectors that could outperform on a relative basis as growth becomes scarce (such as technology) than we are on sectors that are tied to cyclical economic growth. For what it’s worth, both sectors have posted positive performance and outperformed the market in between yield curve inversion and recession in three of the last four instances. — JPM AM
Equities
Net income for the six biggest U.S. banks will be down about 35% from a year earlier, according to analyst estimates from Refinitiv I/B/E/S. -- Reuters 11.04.2022
Bonds
Twitter from 2022-04-08
Commodities
Reports show that some Chinese copper and aluminium semi-fabricators have been forced to scale back operations due to raw material shortages and inventory build-ups in final products — ING Economics 11.04.2022
ESG in one chart. Crude oil to the moon, oil rig count doesn't follow. -- Twitter from 2022-04-08
The EU imports about 30 per cent of its oil and 40 per cent of its gas from Russia, paying Moscow roughly $850mn a day at current prices to keep the hydrocarbons flowing. -- FT 2022-04-08
(Of 551bn cubic metres of gas produced by Gazprom) 331bn cubic metres were consumed in Russia and 168bn were piped to Europe.
Other than Russia, the only suppliers of piped gas to Europe are Norway, Azerbaijan, Libya and Algeria, where state-owned Sonatrach sent 34bn cubic metres via pipelines to Spain and Italy last year.
The Oxford Institute for Energy Studies estimates that Norway could raise exports by up to 5bn cubic metres and Azerbaijan by up to 3bn cubic metres
Replacing all Russian piped gas into Europe would require 112mn tonnes of LNG a year, equivalent to almost a third of today’s global LNG market, according to Bernstein Research.
The world’s third-biggest LNG exporter behind Australia and Qatar, the US has already said it will help the EU secure an additional 15bn cubic metres of LNG in 2022 and more in future, without specifying how much will come from the US and how much from other countries.
State-owned QatarEnergy produced 110bn cubic metres of gas last year, of which 24bn were consumed in Qatar and 86bn converted to LNG for export
Among the seven western supermajors, UK-listed Shell was the biggest gas producer last year, extracting 103bn cubic metres from gas projects around the world, 44bn of which was converted to LNG, according to Wood Mackenzie.
Whether or not formal sanctions on gas exports are introduced, Energy Aspects expects Russian supplies into Europe to fall by at least 21bn cubic metres this year when long-term contracts due to expire in 2022 are not renewed.
Breakdown of the 120mln bbl release from the IEA -- Twitter from 2022-04-07
IEA: APPROXIMATELY 240 MILLION BARRELS OF EMERGENCY OIL STOCKS WILL BE MADE ACCESSIBLE TO THE GLOBAL MARKET DURING THE NEXT SIX MONTHS. -- Twitter from 2022-04-07
RUSSIAN OIL PRODUCERS ARE RAPIDLY FILLING UP STORAGE TANKS. RUSSIAN PRODUCERS' SPARE STORAGE CAPACITY FELL 27% IN MARCH. -- Twitter 2022-04-06
The Panama Canal Authority proposed a comprehensive restructuring of its toll system on Friday, which would increase rates charged on cargo such as vehicles, oil and gas and soybeans that cross the waterway as ocean shippers rake in record profits. (...) Among the most affected segments would be passenger vessels and container ships. — Bloomberg 2022-04-04