Hello. It is good to have you here.
Executive Summary:
The week was filled with US statements to the Ukraine war. Aggressive language by President Biden against Russia was very prominent, although main media outlets exaggerated what was actually said in the statements. His actual speeches were more diplomatic, yet still, from a diplomatic point of view, very aggressive.
Russia said that it would require oil and gas that it delivers to be paid in rubles. The reason is that this would require foreign buyers to buy rubles with foreign currency, e.g. dollars or euros. This would support the ruble itself and stabilise the Russian economy but also ensure further foreign currency supply for imports or government bond coupon payments (Russia surprisingly has not defaulted on any payments so far).
In Asia, China has sent Shanghai into Lockdown. With the most important port there, this is likely to hit supply chains, depending on how the Chinese authorities manage the lockdown in the port itself. After Shenzhen and now Shanghai, it is likely that other port cities, like Ningbo, or Qingdao, could follow the same measures.
In financial markets, equities traded mostly up, while commodities were mixed. Dollar strengthened while especially yen and pound traded weakly. Yields traded up across the board, with inflation and stagflation fears on the front of investors concerns. The yield curve flattened further, with 2-10s almost at 10 basis points and the 5-30 year yield curve now inverted.
Politics
Russia may have as much as $140 billion total in yuan-denominated assets, consisting of approximately $80 billion held by the Central Bank of Russia (CBR) with the People’s Bank of China (PBOC), which is approximately 13% of the CBR’s total FX reserve stockpile, and another $60 billion held by the National Wealth Fund (NWF).² Russia also has a $150 billion swap line agreement with China. (...) At least two of the largest Chinese state-owned banks have already restricted funding/financing for purchases of Russian commodities (...). -- Maroon Macro 27.03.2022
Ukrainian troops are recapturing towns east of Kyiv and Russian forces who had been trying to seize the capital are falling back on overextended supply lines, Britain said, one of the strongest indications yet of a shift in momentum in the war. -- Refinitiv Morning News Call 25.03.2022
WASHINGTON, March 23 (Reuters) - The U.S. Trade Representative's office said on Wednesday it has reinstated 352 expired product exclusions from U.S. "Section 301" tariffs on Chinese imports, well short of the 549 exclusions that it was previously considering. The reinstated product exclusions will be effective retroactively from Oct. 12, 2021, and extend through Dec. 31, 2022, USTR said. They cover a wide range of the initially estimated $370 billion worth of Chinese imports that former president Donald Trump hit with punitive tariffs of 7.5% to 25%. -- Reuters 24.03.2022
Commentary by the Author: This is an interesting signal by the US to ease tensions with China. Two reasons could be behind this decision: (1) To ease economic and supply chain tensions between the countries and (2) to come more towards China to turn it against Russia.
German energy relief package. The measures include a one-off energy tax-relief payment of €300 ($330), a three-month reduction in the tax on fuel and a three-month reduction in the cost of monthly tickets for public transport. -- DW 24.03.2022
An increase in delinquencies last year among a smaller pool of U.S. student loans not covered by a forbearance program put in place during the COVID-19 pandemic signals likely problems ahead for almost 37 million loans when that program ends, a New York Federal Reserve analysis showed. — Refinitiv the day ahead 22.03.2022
Yesterday the U.S. Securities and Exchange Commission proposed a new set of rules require public companies to make “certain climate-related disclosures” in their public reports. (…) The rules will require companies to describe what climate-related risks they face and how they manage those risks. If a company has a “transition plan” to adapt to a warming world, or if it “uses scenario analysis to assess the resilience of its business strategy to climate-related risks,” or if it “uses an internal carbon price” to budget for emissions, it will have to describe how it uses those tools. Companies that use carbon offsets will have to disclose and quantify that. There will be disclosures in companies’ financial statements describing how the financials are affected by climate risks. (…) Companies will also have to disclose their greenhouse gas emissions. (…) Large companies will have to get their Scope 1 and 2 numbers audited, or rather “attested” by a qualified carbon-emissions-attesting firm. — Bloomberg Opinion 22.03.2022
The Biden administration has transferred a significant number of Patriot antimissile interceptors to Saudi Arabia, fulfilling an urgent request from the kingdom that has become a point of contention in relations between Washington and Riyadh, according to reports -- Aljazeera
Commentary by the Author: This could also be interpreted as a plead to OPEC to increase oil output this week.
BIDEN APPROVAL RATING DROPS TO NEW LOW OF 40%, ACCORDING TO REUTERS/IPSOS POLL CONDUCTED ON MARCH 21-22 BIDEN'S APPROVAL RATING MIRRORS TRUMP'S RATING AT THIS POINT IN HIS PRESIDENCY -- Twitter 22.03.2022
Economy
4Q21 Real GDP showed the economy expanded at a revised 7.0% annual rate in 4Q21, a reacceleration from the 3Q21 slowdown. (...) February nonfarm payrolls rose by a robust 678K, well above consensus expectations for a 423K gain. (...) The 4Q21 earnings season was solid, with 501 companies reporting (99.8% of market cap). 75% of companies have beaten on earnings expectations and 69% have beaten on revenue expectations. (...) Inflation has far exceeded the FOMC’s 2% target, with the headline PCE price index rising +0.6% m/m and +6.1% y/y in January. The core PCE deflator also rose to +0.5% m/m and +5.2% y/y. -- J.P. Morgan AM via IKBR Trader's Insight Newsletter 28.03.2022
Italian Consumer confidence fell in March by twelve points, from 112.4 in February to 100.8, the biggest one-month fall on record, reaching the lowest level since January 2021. -- ING Economics 25.03.2022
Germany Ifo Index came in low at 90.8 in March, from 98.5 in February, lowest since January 2021 -- ING Economics 25.03.2022
UNIVERSITY OF MICHIGAN CONSUMER SENTIMENT INDEX IS AT THE LOWEST SINCE AUGUST 2011. -- Twitter 25.03.2022
Coronavirus
Shanghai, China's most populous city, again tightened the first phase of a two-stage COVID-19 lockdown, asking some residents to stay indoors unless they are getting tested as the number of daily cases rose beyond 4,400. -- Refinitiv Morning News Call 29.03.2022
Monetary
The Bank of Japan kept up its relentless quest to defend a key yield cap by offering to buy unlimited amounts of 10-year government bonds, putting even more downward pressure on the yen and testing its resolve to keep policy ultra-loose. -- Refinitiv Morning News Call 29.03.2022
Bloomberg Opinion Points of Return by John Authors 29.03.2022
BOJ MEMBERS: WE WILL NOT HESITATE TO ADD EASING IF NECESSARY. -- Twitter 24.03.2022
The futures market is fully pricing in 75bp of tightening in the next two meetings, which implies at least one 50bp increase. (…) A number of European Central Bank speakers yesterday – including President Christine Lagarde – failed to yield any market-moving headlines, and likely cemented the notion that the ECB is set to remain a bystander for the next couple of meetings while the Fed presses on with more aggressive tightening — ING Economics 23.03.2022
Markets
Equities
Citiustech, a health-care technology firm, has filed confidentially for a U.S. initial public offering, according to people familiar with the matter. -- Bloomberg 28.03.2022
Commentary by the Author: This is an interesting signal because China was initially very closed to letting firms register in the US because of the tensions between the countries and the regulatory differences. But there are more news on China opening up to allowing listings overseas.
Apple Inc. is planning to cut the output of its iPhone and AirPods devices as the Ukraine crisis and looming inflation start to weigh on demand for consumer electronics, the Nikkei reported on Monday, citing sources. The company plans to make about 20% fewer iPhone SEs next quarter, or lower production orders by about 2 million to 3 million units than originally planned, due to weaker-than-expected demand, Nikkei said. The U.S. tech giant also reduced orders for its AirPods wireless headphones by more than 10 million units for all of 2022, as it scales back the level of inventories due to lukewarm demand, the newspaper said. -- Refinitiv Morning News Call 28.03.2022
Walmart is stopping cigarette sales in some U.S. stores after years of debate within the retail giant's management team about selling tobacco products, the Wall Street Journal reported. -- Refinitiv Morning News Call 28.03.2022
Morgan Stanley has downgraded European Banks to neutral as banks have decoupled from rising rates. Says risk-reward for Banks has deteriorated as Ukraine war has upended the European macro outlook from one of good growth w/moderate inflation to much weaker growth & high inflation -- Twitter 28.03.2022
Bonds
Bloomberg Opinion Points of Return by John Authors 29.03.2022
Commodities
DUBAI, March 28 (Reuters) - Russian oil is needed by energy markets and no producer can substitute its production, United Arab Emirates energy minister Suhail al-Mazrouei said on Monday. He told an industry event that OPEC+ needed to stay together, stay focused and not allow politics to distract the group. -- Reuters 28.03.2022
US and EU reached a deal where the US would supply the bloc with at least an additional 15bcm of LNG this year. (...) Longer-term, the EU will work towards buying an additional 50bcm of US LNG per year through until at least 2030. -- ING Economics 28.03.2022
11 Chinese government departments including agriculture ministry tell local governments at all levels and state-own enterprises to ensure supply and stable prices of fertilizer for spring application season. -- Twitter 28.03.2022
Belarus is the third-largest supplier of potash in the world and its state-owned miner, Belaruskali, declared force majeure after sanctions were imposed by the US and Europe. The number two supplier of potash globally? Russia. Perhaps front-running the Russian move on Ukraine, China halted phosphate exports last fall in an effort to ensure adequate domestic supply. (...) While global oil demand hasn’t yet reached its pre-pandemic level, global diesel consumption surged to a fresh all-time high in the fourth quarter of 2021 (Javier Blas) -- Doomberg 26.03.2022
Small-scale farmers in some of the world’s richest coffee-producing regions are struggling to find alternatives to counter soaring fertilizer costs (...). While global coffee prices have increased 86% in the past two years, adverse weather and higher shipping costs have kept margins for many smaller farmers under pressure. (...) The coffee market will start to panic by the third quarter, according to Christian Wolthers, who runs a Florida-based importer and has representatives across Latin America. Brazil, the top coffee grower and biggest importer of crop nutrients, only has enough fertilizer supply for three to six months, he said. Global coffee production will fall 2.1% to 167.2 million bags for the current marketing year, pulled down by a 7.1% decline in arabica beans, according to the latest outlook from the International Coffee Organization. -- Bloomberg 23.03.2022
Iranian Oil Minister Javad Owji said in televised remarks on Saturday that the country will try to raise its oil and condensates exports to 1.4 million barrels per day as set out in the annual state budget. "In parliament, lawmakers decided to raise the ceiling of exports of oil and condensates from 1.2 million barrels (per day) to 1.4 million barrels. The Oil Ministry will do everything in its power to realize the level set in the budget," Owji told the state television. -- CGTN 21.03.2022
Other interesting things:
Economist 24.03.2022