Russia will stop supplying gas to Finland after its refusal to pay in rubles, marking the third European country cut off by Moscow

Futures Tumble, Treasuries And Rate Cut Odds Soar Amid Panic That Deutsche Bank Is The Next To Go Yesterday, while attention was still focused on the US banking system and the ongoing botched response by the Fed and especially the Treasury's senile Secretary, who more than two weeks after SIVB collapsed, have still not been able to stabilize confidence in banks - thereby assuring the US is about to slam head first into a brutal recession, just as Biden ordered to contain inflation, as US consumer spending is now in freefall - we pointed out that something bad was taking place in Europe: the credit default swaps of perpetually semi-solvent banking giant Deutsche Bank were quietly blowing out to multi-year highs. oh... pic.twitter.com/vNXc8ZE3Nm — zerohedge (@zerohedge) March 23, 2023 Well, we didn't have long to wait before everyone else also noticed and this morning it's official: the crisis has shifted to Germany's and Europe's largest TBTF bank, with even Bloomberg now writing that Deutsche Bank "has become the latest focus of the banking turmoil in Europe as ongoing concern about the industry sent its shares slumping the most in three years and the cost of insuring against default rising." The bank - which has staged a recovery in recent years after a series of crises that nearly brought it down - said Friday it will redeem a tier 2 subordinated bond early. And while such moves are usually intended to give investors confidence in the strength of the balance sheet, though the share price reaction suggests the message isn’t getting through, and the stock plunged 13% in German trading... ... while DB's CDS has exploded to level surpassing the bank's near-collapse in 2016, and is about to take out the covid wides. “It is a clear case of the market selling first and asking questions later,” said Paul de la Baume, senior market strategist at FlowBank SA. “Traders do not have the risk appetite to hold positions through the weekend, given the banking risk and what happened last week with Credit Suisse and regulators.” It wasn't just Deutsche Bank: UBS Group AG shares also dropped as Bloomberg reported that it’s one of the banks under scrutiny in a US Justice Department probe into whether finncial professionals helped Russian oligarchs evade sanctions, according to people familiar with the matter. In any case, the sudden, violent spike in DB default risk which quickly carried over to all big European banks, and which will not reverse until first the ECB then the Fed both cut rates... ... sent broader risk sentiment reeling with S&P 500 futures at session lows, sliding 1% to 3940. While there was no one big story setting off these moves. It could be a rush to havens heading into the weekend as traders wait for another shoe to drop — which has been a theme during recent weekends. In any case, the latest global equity rout and bank crisis which is now spreading to TBTF banks has sent bond yields crashing with the 2-year US yield plumbing new session lows, breaking down as low as 3.55%, and the resulting shockwave has collapsed odds of another rate hike in May to just 28% while the odds of a rate cut in June have exploded to 83% as the Fed's pivot finally arrives just on time: with the Fed having again broken the global financial system. In premarket trading, First Republic Bank swung between gains and losses as investors digested Treasury Secretary Janet Yellen’s comments about regulators being prepared to take additional steps to guard bank deposits if warranted. Fellow regional banks and bigger lenders decline, and after a volatile session on Thursday took the stock’s March slump to 90%. Block fell another 5%, extending Thursday’s 15% plunge as it announced potential legal action against short seller Hindenburg Research for its report on the payment processor.  Here are some other notable premarket movers: US cryptocurrency-exposed stocks decline, taking a pause from recent gains as the price of Bitcoin falls amid broader risk-off sentiment. Marathon Digital (MARA US) slid 0.9%, Hut 8 Mining Corp (HUT US) -1%, Coinbase (COIN US) -1.9%, Riot Platforms (RIOT US) -1.4%. ReNew Energy Global gains 12% after Bloomberg reported, citing people familiar with the matter, that the Canada Pension Plan Investment Board is exploring buying the shares of the power producer that it doesn’t already own and taking the Nasdaq- listed firm private. Joann slumped 6.2% in extended trading on Thursday after the fabric and crafts retailer reported adjusted earnings per share and Ebitda that missed the average analyst estimates, even as sales topped expectations. Oxford Industries fell 5.5% in postmarket trading after the owner of Tommy Bahama and Lilly Pulitzer issued a forecast for net sales in the current quarter that trailed the average analyst estimate at the midpoint of the guidance range. “Confidence is fragile, market volatility is likely to stay high, and policymakers may have to go further to make sure faith in the global financial system stays solid,” said Mark Haefele, chief investment officer at UBS Wealth Management. “Financial conditions are also likely to tighten, which increases the risk of a hard landing for the economy, even if central banks ease off on interest-rate hikes.” “Credit and stock markets too greedy for rate cuts, not fearful enough of recession,” a team led by Michael Hartnett wrote in a note. The strategist, who was correctly bearish through last year, said investment-grade spreads and stocks will be taking a hit over the next three to six months. Global cash funds had inflows of nearly $143 billion, the largest since March 2020 in the week through Wednesday — adding up to more than $300 billion over the past four weeks, according to the note citing EPFR Global data. European stocks are also plumbing lower, with European bank stocks sliding for a third day, and erasing weekly and yearly gains, as sentiment remains fragile on the sector. Deutsche Bank slumped nearly 15% as credit-default swaps surged amid wider concerns about the stability of the banking sector. The Stoxx 600 Banks Index is 5.3% lower as of 11:20am in London, erasing earlier weekly gains; the index is now -2.8% YTD. Meanwhile, UBS, which is not in the banking sector index, slumped as much as 8.4% as Jefferies cut its rating to hold from buy and it was among the banks under scrutiny in a US Justice Department probe into whether financial professionals helped Russian oligarchs evade sanctions. European oil stocks are also underperforming on Friday, dragging down the regional benchmark, as crude prices slump under pressure from a stronger dollar and concerns about the impact on growth of a fresh bout of stress facing the banking sector. The Energy sub-index slid as much as 4.3%, the most since March 15, while the Stoxx Europe 600 benchmark fell about 2%. Here are some other notable European movers: Casino Guichard-Perrachon SA fell as much as 6% to a fresh record low after Moody’s cut its long-term debt rating on the company further into junk territory Dino Polska drops as much as 5%, after its 4Q report showed that the Polish food supermarket chain is unable to maintain profitability amid inflation pressures Smiths Group gains as much as 2.1%, after the industrial firm beat expectations on Ebita, while also surpassing projections on its full-year sales outlook JD Wetherspoon jumps as much as 9.3% after the British pub operator posted a revenue beat for 1H, with Jefferies analysts noting resilience in like-for-like sales Earlier in the session, Asia equities were set to snap a three-day rally as lingering concerns over the health of the banking sector pushed a gauge of the region’s financial shares lower. The MSCI Asia Pacific Index fell as much as 0.5% before trimming losses, with its 11 sectoral sub-gauges showing mixed moves. Most markets declined, led by Hong Kong’s Hang Seng Index, while Chinese tech shares extended their rally on the back of positive earnings.  An index of Asian financial stocks dropped as much as 0.9%, tracking overnight declines in a measure of US financial heavyweights to the lowest since November 2020. Treasury Secretary Janet Yellen’s comments that authorities can take further steps to protect the banking system if needed failed to fully assuage concerns.  “The unease in the financial space will continue to weigh on the Asian financial sectors,” said Hebe Chen, an analyst at IG Markets Ltd. “The flip-flop in the market this week is seeing overwhelmed investors scratching their heads in the face of the mixed bag from Fed.”  Even with Friday’s lackluster moves, the MSCI Asia benchmark was set to notch its best weekly performance in about two months. The shares rose earlier in the week thanks to assurances from regulators in the US and Europe over protecting the banking sector and the Federal Reserve’s dovish tilt.   Meanwhile, a gauge of tech stocks in Hong Kong advanced for the fourth day close at its highest in a month. Lenovo led the gain, with JPMorgan lifting its recommendation on a bottoming of PC demand. “We like the internet sector, especially within China right now,” Marcella Chow, JPMorgan Asset Management’s global market strategist, said in an interview with Bloomberg TV. “China tech sector is attractive given improving regulatory outlook, leaner and more cost effective cost structure, improving margin.”  Japanese stocks Inched lower as worries linger over the financial sector while investors assess statements made by US Treasury Secretary Janet Yellen. The Topix Index fell 0.1% to 1,955.32 as of market close Tokyo time, while the Nikkei declined 0.1% to 27,385.25. Mitsubishi UFJ Financial Group Inc. contributed the most to the Topix Index decline, decreasing 1.1%. Out of 2,159 stocks in the index, 976 rose and 1,039 fell, while 144 were unchanged. “Assuming that the fallout from the US financial sector woes doesn’t spread significantly, Japanese stocks will likely stop its decline and pick up as the earnings period starts next month,” said Takeru Ogihara, a chief strategist at Asset Management One Australian stocks slumped to post a seventh week of losses; the S&P/ASX 200 index fell 0.2% to close at 6,955.20, with financials the biggest drag, as the malaise hanging over the global banking sector continued to damp sentiment. The benchmark erased 0.6% for the week, the seventh straight decline, maintaining the longest losing streak since 2008.  In New Zealand, the S&P/NZX 50 index fell 0.1% to 11,580.82. Indian stocks declined for a third straight week in the longest losing streak since December spurred by a late selloff in key gauges amid risk-off sentiment in global equities. The Nifty 50 index ended just shy of entering a so-called technical correction given the index’s near 10% drop from its December peak. For the week, the Nifty 50 fell 0.9% while the Sensex declined 0.8%. The S&P BSE Sensex fell 0.7% to 57,527.10 as of 3:30 p.m. in Mumbai, while the NSE Nifty 50 Index declined 0.8% to 16,945.05.  The selloff in small and mid cap counters contributed to the broader losses, with the Nifty Mid cap 100 and Nifty Small Cap 100 indexes ending nearly 2% lower each. Stocks of asset management companies were hammered after the government dropped the benefit of long-term capital gains tax for debt mutual funds in order to ensure parity in tax treatment with other such products. Shares of HDFC AMC dropped 4.1%, Aditya Birla AMC -2%, UTI AMC -4.8% and Nippon Life India AMC -1.2%. Reliance Industries contributed the most to the index decline, decreasing 2%. Out of 30 shares in the Sensex index, six rose and 24 fell In FX, the dollar’s recent weakness, which had supported the outlook for the region’s currencies and other assets, also took a breather on Friday. The Bloomberg dollar index rose 0.3% after a six-day run of declines. The yen rallies to the highest in six weeks amid demand for haven assets due to concerns over the health of the global banking sector. The yen was the biggest gainer versus the greenback among the Group-of-10 currencies. Treasury yields continued to decline reflecting expectations for Federal Reserve rate cuts this year “JPY’s strong performance we believe is driven by the return of its safe haven appeal, especially given that we see that Japanese banks are in a relatively better standing,” said Alan Lau, a strategist at Malayan Banking Bhd in Singapore. “Falling UST yields have also given the JPY support recently. Overall, we are positive on the yen and see the spot being on a downward trend this year with our year-end forecast at 122” In rates, Treasuries front-end adds to Thursday’s gains, with 2-year yields richer by over 20bp on the day, as the yield continues to plumb new session lows, breaking as low as 3.55%, dropping below th 2023 lows, and steepening the curve as traders continue to price out rate-hike premium for the May meeting and start pricing for cuts as early as June. Yields were near lows of the day while rest of the curve is richer by 17bp across belly to 9bp out to long-end; front-end led gains steepens 2s10s, 5s30s by 10bp and 8bp on the day. SOFR white-pack futures surge higher, with gains led by Dec23 contract which rallied 27bp vs. Thursday close; Fed-dated OIS shows just 4bp of rate hike premium for the May policy meeting with almost a full cut then priced into the June policy meeting — around 120bp of rate hikes are then priced into year-end In commodities, oil slipped the most in over a week, with Brent below $75, tracking a slide in equity markets and feeling the effects of a stronger dollar. Aluminum and copper headed toward their biggest weekly gains in more than two months on increasing demand in China and bets on looser Federal Reserve policy. Uranium Energy is among the most active resources stocks in premarket trading, falling about 9%. Gold traded just shy of $2000 and is about to break solidly higher. To the day ahead now, and data releases include the March flash PMIs from Europe and the US, along with UK retail sales for February, and the preliminary US durable goods orders for February. Otherwise from central banks, we’ll hear from the ECB’s De Cos, Nagel and Centeno, the Fed’s Bullard and the BoE’s Mann.   Market Snapshot S&P 500 futures down 1% to 3,940 MXAP down 0.2% to 160.13 MXAPJ down 0.5% to 515.46 Nikkei down 0.1% to 27,385.25 Topix down 0.1% to 1,955.32 Hang Seng Index down 0.7% to 19,915.68 Shanghai Composite down 0.6% to 3,265.65 Sensex down 0.2% to 57,801.12 Australia S&P/ASX 200 down 0.2% to 6,955.24 Kospi down 0.4% to 2,414.96 STOXX Europe 600 down 0.7% to 443.10 German 10Y yield little changed at 2.11% Euro down 0.4% to $1.0791 Brent Futures down 0.6% to $75.46/bbl Gold spot down 0.3% to $1,987.17 U.S. Dollar Index up 0.30% to 102.84 Top Overnight News A Federal Reserve facility that gives foreign central banks access to dollar funding was tapped for a record $60 billion in the week through March 22: BBG Deutsche Bank AG was at the center of another selloff in financial shares heading into the weekend: BBG Credit Suisse Group AG and UBS Group AG are among banks under scrutiny in a US Justice Department probe into whether financial professionals helped Russian oligarchs evade sanctions, according to people familiar with the matter: BBG Japan’s headline national CPI for Feb cools to +3.3% (down from +4.3% in Jan and inline w/the St) while core ticks higher to +3.5% (up from +3.2% in Jan and ahead of the St’s +3.4% forecast). RTRS Copper prices will surge to a record high this year as a rebound in Chinese demand risks depleting already low stockpiles, the world’s largest private metals trader has forecast. Global inventories of the metal used in everything from power cables and electric cars to buildings have dropped rapidly in recent weeks to their lowest seasonal level since 2008, leaving little buffer if demand in China continues to pace ahead. FT Authorities this week raided the Beijing offices of Mintz Group, detaining all five of the New York-based due diligence firm’s staff members in mainland China, the company said—an incident likely to unnerve global businesses operating in the country. WSJ China’s top diplomat Wang Yi urged Europe to play a role in supporting peace talks for Russia’s war in Ukraine, though the US has warned Beijing’s proposals would effectively freeze the Kremlin’s territorial gains. BBG Ukrainian troops, on the defensive for months, will soon counterattack as Russia's offensive looks to be faltering, a commander said, but President Volodymyr Zelenskiy warned that without a faster supply of arms the war could last years. RTRS Europe’s flash PMIs for March were mixed, with upside on services (55.6, up from 52.7 in Feb and ahead of the St’s 52.5 forecast) but downside on manufacturing (47.1, down from 48.5 in Feb and below the St’s 49 forecast). “Inflationary pressures have continued to moderate, with input prices falling sharply in manufacturing… overall input costs rose at the slowest rate since March 2021…the record easing of supply constraints marks a major reversal from the record delays seen during the pandemic” S&P Deutsche Bank was at the center of another selloff in financials. The bank tumbled 11% in Frankfurt and default-swaps on its euro, senior debt surged to the highest since they were introduced in 2019, when Germany revamped its debt framework to introduce senior preferred notes. Other banks with high exposure to corporate lending also declined. Commerzbank slid 9% and Soc Gen 7%.  BBG The Swiss authorities and UBS Group AG are racing to close the takeover of Credit Suisse Group AG within as little as a month, according to two sources with knowledge of the plans, to try to retain the lender's clients and employees. RTRS Citizens Financial is set to submit a bid for SVB's private banking arm, Reuters reported. Customers Bancorp is also said to be exploring a deal for all or part of SVB. Carson Block said depositors at SVB and Signature Bank should have taken haircuts after regulators seized the firms. BBG A more detailed look at global markets courtesy of Newsquawk APAC stocks were mostly subdued after the recent bout of central bank rate hikes and choppy performance stateside where Wall Street just about closed higher amid a dovish market repricing of Fed rate expectations.     ASX 200 was lower with risk appetite sapped by weak PMI data which returned to contraction territory. Nikkei 225 lacked conviction after the latest inflation data printed mostly in line with estimates. Hang Seng and Shanghai Comp. retreated after the central bank drained liquidity and as participants digest earnings releases, while it was also reported that the US added 14 Chinese entities to the red flag list. Top Asian News HKMA said Hong Kong has very little exposure to the European and US banking situation, while it needs to monitor the situation carefully for any further volatility but is not concerned about risks to the Hong Kong banking sector. China is to extend some tax relief measures, according to local media. Equities are back under marked pressure as banking sector concern re-intensifies within Europe, Euro Stoxx 50 -2.3% & ES -0.8%. Specifically, the European banking index SX7P -5.0% is the standout laggard amid broad-based pressure in banking names as CDS' for the stocks continue to rise alongside focus on the redemption of notes by Deutsche Bank and Lloyds; currently, Deutsche Bank -12% is the Stoxx 600 laggard. Stateside, futures are pressured in tandem with the above price action though with the magnitude less pronounced ahead of the arrival of US players and as we await potential updates to the regions own banking names. Apple (AAPL) supplier Pegatron (4982 TW) is reportedly looking to open a second factory within India, to construct the latest iPhone models, via Reuters citing sources. Top European News ECB is likely to reassure EU leaders regarding bank stability on Friday and is to call for EU deposit insurance, according to Reuters. ECB's Nagel says it is necessary to increase policy rates to sufficiently restrictive levels, whilst the APP wind down should accelerate from Q3. Domestic price pressures are likely to last for longer, whilst underlying inflation is increasingly concerning. There are signs of second-round effects from inflation-induced higher wage increases. ECB's Nagel says there is often a bumpy road after similar instances in the banking sector, not surprising there have been market moves. On Deutsche Bank's share slide, ECB's Nagel will not comment. BoE's Bailey says rates will rise again if firms hike prices, via BBC; "If all prices try to beat inflation we will get higher inflation," Bank headlines Deutsche Bank (DBK GY) announces a decision to redeem its USD 1.5bln fixed to fixed reset rate subordinated Tier 2 notes, due 2028. Lloyds (LLOY LN) has issued a notice of redemption for the entire outstanding principal amount of the USD 1bln 0.695% senior callable fixed-to-fixed rate notes due 2024. In terms of the accompanying risk-off price action, the desk notes the early redemption(s) can perhaps be taken as a negative if we assume the justification is that the bank(s) expect to see more dovishness/risk-off before the next fixed-to-fixed rate adjustment. UBS Wealth Management head Khan offered a retention package to Credit Suisse's Asia staff in Hong Kong town hall which focuses on stabilising the Credit Suisse Asia team and boosting banker confidence, according to sources. Credit Suisse (CSGN SW) and UBS (UBSG SW) are among the banks facing a US Russia-sanctions probe. Fed Balance Sheet: 8.784tln (prev. 8.689tln); Total factors supplying reserve funds 8.784tln (prev. 8.689tln); Loans 354.191bln (prev. 318.148bln); Bank Term Funding Program 53.669bln (prev. 11.943bln); Other credit extensions 179.8bln (prev. 142.8bln). FX The USD is benefitting from the marked risk-off move with the index surpassing 103.00 from a 102.50 base in short-order and extending further to a 132.25+ peak since. Action which comes to the detriment of peers ex-JPY, as USD/JPY has been lower by roughly a full point at worse (best) given its haven allure and with JPY repatriation factoring. Notably, CHF is outperforming its peers, ex-JPY, but is still softer overall as its proximity/exposure to the European banking situation continues to overshadow traditional haven status vs USD though it is markedly outperforming the EUR as the focus is on EZ banks this morning. As such, EUR is the standout laggard with EUR/USD down to a 1.0722 trough vs initial 1.0830 best, antipodeans are similarly hampered given their high-beta status and after Thursdays firmer action. Cable failed to see a lasting benefit from the morning's retail data while the subsequent PMIs were slightly softer than expected; but, again, the action is very much USD-driven. PBoC set USD/CNY mid-point at 6.8374 vs exp. 6.8367 (prev. 6.8709) Fixed Income Core benchmarks are experiencing a marked bid given the risk-off price action that we are seeing with an accompanying dovish re-pricing being seen for Central Banks. Specifically, Bunds have surpassed 139.50 and USTs above 1.17 with the respective 10yr yields down to 2.02% and 3.29% with market pricing in favour of an unchanged outcome at the next ECB and Fed meetings as such. Gilts are moving in tandem with EGB/UST peers and have eclipsed 107.00; BoE pricing is now heavily in favour of an unchanged outcome at the May meeting. Commodities Commodities diverge given the marked risk-off action with crude and base metals pressured while precious metals glean incremental support as the USD offsets the benefit of haven demand. Specifically, WTI and Brent are under USD 68.00/bbl and USD 74.00/bbl respectively which places them at the mid/lower-end of the current WTD USD 64.12-71.67/bbl and USD 70.12-77.44/bbl parameters. Spot gold is incrementally firmer though is yet to convincingly surpass USD 2k/oz while base metals are dented by the aforementioned tone with 3-month LME Copper slipping further below 9k to a USD 8940 low. Russia could recommend a temporary halt to wheat and sunflower exports, via Vedomosti; due to the sharp decline in prices. US base at North-east Syria's Al-Omar oil field has been targeted in an attack, according to security sources cited by Reuters. UBS maintains a positive outlook on Gold and targets USD 2050/oz by the end of the year. Geopolitics Ukraine's top ground forces commander said Ukrainian troops are to launch a counterassault soon as Russia's large winter offensive weakens without capturing the eastern city of Bakhmut, according to Reuters. Russian Security Council Deputy Chairman Medvedev says cannot rule out that Russian forces will need to reach Kyiv or Lviv to 'destroy the infection', according to RIA. US Pentagon said the US conducted air strikes in Syria which targeted an Iranian-backed group in response to a deadly UAV attack, according to Reuters and Wall Street Journal. US Treasury Secretary Yellen said sanctions on Iran have created a real economic crisis in that country and the US is constantly looking at ways to strengthen Iran sanctions but added that sanctions may not be sufficient to change a country's behaviour, according to Reuters. China's Defence Ministry said it monitored and drove away a US destroyer which entered the South China Sea Paracel Islands on Friday again and sternly demands the US to immediately stop such provocations, according to Reuters. North Korea said it conducted an important weapon test and firing drill from March 21st-23rd, while it added that it conducted a new underwater attack system in which it tested a new nuclear underwater attack drone and launched strategic cruise missiles. Furthermore, North Korea said its leader Kim guided the military activities and that Kim seriously warned enemies to stop reckless anti-North Korea war drills, according to KCNA. South Korean President Yoon said they will step up security cooperation with the US and Japan against North Korea's nuclear and missile provocations, while he said they will make sure North Korea pays the price for its reckless provocations, according to Reuters. US Event Calendar 08:30: Feb. Durable Goods Orders, est. 0.2%, prior -4.5% 08:30: Feb. -Less Transportation, est. 0.2%, prior 0.8% 08:30: Feb. Cap Goods Orders Nondef Ex Air, est. -0.2%, prior 0.8% 08:30: Feb. Cap Goods Ship Nondef Ex Air, est. 0.2%, prior 1.1% 09:45: March S&P Global US Manufacturing PM, est. 47.0, prior 47.3 09:45: March S&P Global US Services PMI, est. 50.2, prior 50.6 09:45: March S&P Global US Composite PMI, est. 49.5, prior 50.1 10:00: Revisions: Wholesale Inventories 11:00: March Kansas City Fed Services Activ, prior 1 DB's Jim Reid concludes the overnight wrap There's a bad bout of conjunctivitis going round the school at the moment and every member of the family has now had it with the last hold out being me until yesterday. So my eyes are a bit blurry this morning looking at screens. One of the twins believes he has conjunctiv"eye-test" as he thinks it's called. If he hadn't given it to me I'd think he was quite sweet. As I was looking at screens last night through weepy eyes, markets looked like they were trying to normalise. However late weakness in financials again was a big drag on the last couple of hours of US trading. Just after the European close, the S&P 500 was up over +1.2% and looked set to reverse a good portion of the previous day’s losses. However by the end of the session, further weakness in banks and cyclicals more broadly left the index only +0.30%, but having been down nearly half a percent with 30 minutes left in trading. The VIX, which intraday was near its lowest level (20.18) since the SVB issues became prominent, ended the day 0.35pts higher at 22.6. Today we'll see if the flash PMIs around the world are impacted by the early part of the mini banking crisis we've seen in the last two weeks. So watch the European and US numbers carefully. The renewed weakness in banks yesterday actually started in Europe with the STOXX Banks index down -2.27%. The STOXX 600 recovered from an intraday low of almost -1.0% to finish -0.21% lower overall. CDS markets highlighted the stress in European financials as the Subordinated Financial CDS index widened (+20bps) for the first time since last Friday – before the CS-UBS merger news – while the Senior CDS index was +9bps wider. In the US, the Regional bank ETF, KRE, was down -2.78% yesterday whilst the broader KBW Bank index was -1.73% lower as liquidity concerns of the smaller banks continue to permeate. Staying with bank liquidity, after the US close last night, the Fed’s weekly balance sheet data showed that the use of the Fed’s discount window was down from $153bn to $110bn, while the credit deployed to SVB and Signature was up from 143bn to 180bn, and lastly the new emergency bank lending facility (BTFP) was up from $12bn to $54bn. So net of the two failed banks there was little change, indicating that banks were not finding it necessary to access cheap capital. The market should look favourably on that from a contagion standpoint. Overnight S&P and Nasdaq futures are both up around +0.2% and 2 and 10yr UST yields are both around -4.5bps lower as we go to press. Far before that balance sheet data came out the S&P 500 opened much stronger, up +1.8% and stayed buoyant through the first three hours of trading, before the weakness in regional banks weighed on overall sentiment throughout the US afternoon. This was most pronounced with a bout of selling just before Treasury Secretary Yellen spoke in front of a House of Representatives subcommittee an hour or so before the US close. The selling might have been nervousness ahead of her remarks, given the negative market reaction to her comments before the Senate on Wednesday. Regardless, the S&P actually saw a +1.0% whipsaw move when Yellen said that the US government was “prepared for additional deposit action if warranted.” This was quickly faded, with the index continuing to trade between smaller gains and losses until it ended the day +0.30% higher. Despite the weakness in banks and Energy (-1.4%) on the back of lower oil prices, the S&P finished in the green thanks to Tech stocks outperforming on the lower rate outlook. The FANG+ index surged by +2.53%, whilst the NASDAQ 100’s gains (+1.19%) mean it’s now up nearly 20% from its lows at the end of December, almost meeting the traditional definition of a bull market. On the rates side, 10yr Treasury yields held up for the most part, with the 10yr yield -0.08bps to 3.427%. Short-dated rates were another story, with 2yr yields -10.4bps lower to 3.833% fully on the back of lower inflation expectations (-13.3bps), while 5yr rates were -7.2bps lower. This saw the 2s10s yield curve normalise a further +9.4bps yesterday to -41.3bps, which is the least inverted the curve has been in over 5 months. This drop in yields led by inflation expectations was also borne out in fed future pricing, where the market now only sees a 40% chance of a 25bp hike during the May meeting. In Europe there was a sharp decline in longer dated yields that accelerated later in the session, with yields on 10yr bunds (-13.3bps), OATs (-12.3bps) and BTPs (-10.4bps) all moving lower. Furthermore, those moves came in spite of some of the ECB’s hawks calling for further tightening. For example, Austria’s Holzmann said that the ECB would “probably have to add” to its rate hikes at the next meeting in May. And the Netherlands’ Knot said that “I still think that we need to make another step in May, but I don’t know the size of that”. Speaking of central banks, we had the Bank of England’s latest decision yesterday, who hiked rates by 25bps as expected. That takes the Bank Rate up to a post-2008 high of 4.25%, and 7 of the 9 MPC members were in support, with the other 2 preferring to remain on hold. Looking forward, the BoE said that they still expected inflation “to fall significantly” in Q2, aided by falling energy prices and the government’s move to extend the Energy Price Guarantee in last week’s budget. And when it comes to inflationary pressures, they said that if “there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required.” In his review (link here), our UK economist writes that while he sees some upside to growth and pay, there are downsides to services CPI and credit conditions, making the next meeting in May a difficult decision to call. On balance, he sees more downside risks than upside, and holds onto his call for the Bank Rate to remain where it is at 4.25%, with the risks tilted to one further hike. Whilst we’re on central banks, yesterday also saw the Swiss National Bank hike rates by 50bps, taking the policy rate up to 1.5%. There were a number of hawkish-leaning details, including an upgrade in their inflation forecast relative to December, and their statement said that inflation was “still clearly above the range the SNB equates with price stability.” In the meantime, SNB President Jordan said that a “Credit Suisse bankruptcy would have had serious consequences for national and international financial stability and for the Swiss economy” and that “taking this risk would have been irresponsible.” This morning in Asia equity markets are lower with the KOSPI (-0.72%) the biggest underperformer with the Nikkei (-0.41%), the Shanghai Composite (-0.54%), the CSI (-0.27%) and the Hang Seng (-0.21%) trading in negative territory. Data from Japan has shown that consumer price inflation (+3.3% y/y) slowed in line with forecasts but for the first time in 13 months in February, compared to a +4.3% increase in January, mainly due to the effect of government’s energy subsidy program. At the same time, core-core CPI (excluding both fresh food and fuel costs) advanced further to +3.5% y/y in February (v/s +3.4% expected), notching the fastest y-o-y gain since January 1982. It followed a +3.2% increase in January highlighting the underlying inflationary pressures. Staying with Japan, the preliminary estimate for manufacturing PMI showed that sector activity remained in contraction for the fifth consecutive month in March after the reading came in at 48.6, albeit up from the previous month’s final reading of 47.7 as output and new orders remained under pressure. On the contrary, activity in the services sector expanded for the seventh straight month in March as the PMI edged up to 54.2, recording the fastest pace since October 2013, against prior month's reading of 54.0. Elsewhere, manufacturing as well as services in Australia slipped into contractionary territory as the manufacturing PMI fell to 48.7 in March from 50.5 in February with the services PMI deteriorating to 48.2 from the prior print of 50.7. When it came to yesterday’s data, the US weekly initial jobless claims came in at a 3-week low of 191k over the week ending March 18 (vs. 197k expected), pointing to continued strength in the labour market. Continuing claims saw a small increase to 1694k (1690k expected) and remains in a slight up-trend but not at a concerning level yet. Meanwhile, the new home sales data for February showed a modest rise to an annualised rate of 640k (vs. 650k expected), taking them up to a 6-month high. Over in the Euro Area, the European Commission’s preliminary consumer confidence data for March showed a decline to -19.2 (vs. -18.2 expected), marking a reduction after 5 consecutive monthly improvements. To the day ahead now, and data releases include the March flash PMIs from Europe and the US, along with UK retail sales for February, and the preliminary US durable goods orders for February. Otherwise from central banks, we’ll hear from the ECB’s De Cos, Nagel and Centeno, the Fed’s Bullard and the BoE’s Mann. Tyler Durden Fri, 03/24/2023 - 08:09.....»»

S&P Futures Rebound Above 4,000, Boosted By Surging Nvidia US futures rebounded from yesterday's post FOMC selloff, rising back over 4,000 as concern about aggressive monetary tightening eased and Nvidia soared 10% after giving a bullish revenue outlook. Contracts on the Nasdaq 100 were up 1% as of 7:45 a.m. ET while S&P 500 futures rose 0.4%. The underlying stock gauges closed mixed on Wednesday as minutes from the Federal Reserve’s latest meeting signaled its determination to keep hiking interest rates to combat inflation. The tech rally may be short-lived thought: treasuries edged lower again, reversing yesterday’s gains. The Bloomberg Dollar Spot Index recovered from earlier lows, pressuring most Group-of-10 currencies. Gold was little changed, while oil advanced. Bitcoin rose nearly 2% following two days of losses, before fading some of its gains. In premarket trading, tech stocks were among the best performers, with chipmaker Nvidia, which has a 4.2% weighting in the Nasdaq 100, surging 10% after it reported Q4 results that beat expectations and gave a bullish revenue outlook for the current quarter. Growth in sales of chips for data centers has helped the company weather a slowdown in the PC market as it gears up for an expected boom in artificial intelligence. By contrast, EV maker Lucid plunged 8.1% in premarket trading after it posted worse-than-expected results in the final months of what it called a “challenging” year. Unity Software dropped 7.3% after the company’s revenue forecasts trailed consensus estimates. Here are some other notable premarket movers: EBay shares fall ~5% in US premarket trading after the online auction and retail company’s 2023 guidance came in weaker than expected, with a more difficult macro picture set to weigh and a “challenging” margin outlook. Enovix shares rise ~gr15% in premarket trading after the electronic-components maker reported revenue for the fourth quarter that beat the average estimate. Analysts note the earnings call reiterated milestones disclosed in January’s presentation and progress on cash. Graphite Bio soars 16% in premarket trading after the biotech company unveiled plans to trim its workforce by 50% while exploring “strategic alternatives.”. Teladoc shares fall ~7% in US premarket trading after the online health services firm guided to a slowdown in revenue growth, which analysts said more than offset an improved margin outlook. Unity Software shares drop as much as 8.9% in premarket trading after the software maker’s first-quarter and full-year revenue forecasts trailed consensus estimates. The guidance was the main point of discussion among analysts, with Citi saying it might weaken sentiment toward the stock. Moderna Inc. shares climb 2.9% in postmarket trading after the personalized mRNA cancer vaccine that it’s developing in combination with Merck & Co.’s flagship immunotherapy, Keytruda, received Breakthrough Therapy Designation from the US Food and Drug Administration. Etsy gained 6% in extended trading, after the online retailer focused on handmade and vintage items reported fourth-quarter results that beat expectations. It also gave an outlook that analysts see as mixed. Rackspace Technology gained 8% in postmarket trading after reporting adjusted earnings per share and revenue for the fourth quarter that beat the average analyst estimates. Nvidia provided “an excellent report and solid outperformance amid weakening macro trends,” CJ Muse, an analyst at Evercore ISI, wrote in a note. Still, others saw this as merely another modest bounce in an otherwise bearish slump. Further policy tightening “will create some small recessionary result probably in the third or fourth quarter of 2023, but we will still be in a scenario of soft landing,” said Stephane Monier, chief investment officer at Banque Lombard Odier. “In that scenario we expect the S&P 500 to be around 3,900,” he said on Bloomberg TV. “We are currently underweight US equities as we are expecting a little bit of a correction in the weeks to come,” Monier said. “And we have a strong preference for Asian equities, particularly China but not only.” After months of divergence over the perceived path of monetary tightening, the Fed and markets are increasingly getting aligned in their expectations, reducing the scope for hawkish shocks. While the minutes and comments by Fed officials including James Bullard reiterated a continuing preference for rate hikes, they didn’t say anything that wasn’t factored in by the market’s aggressive repricing of Fed bets in recent weeks.  “One of our big concerns coming into this year was the market was anticipating an event that wasn’t likely to occur, that being a dovish Fed pivot,” Danielle Poli, co-portfolio manager of the diversified income fund for Oaktree Capital Management, said in an interview with Bloomberg Television. “The market has woken back up a little bit in these last two weeks.” US Jobless claims data due Thursday may help shine a light on the strength of the labor market, which has remained stubbornly robust through the rate-hiking cycle. Eurozone inflation data due today will also help investors outline the health of the European economy. European stocks struggled for direction as investors remained wary of the prospect of additional monetary tightening by the Fed when the latest Fed minutes revealed that a “few” officials favored a larger half-point hike. The Stoxx 600 was up less than 0.1% with autos, tech and media the best performing sectors. The FTSE loses 0.4%. Here are some of the biggest European movers: Rolls-Royce shares soar as much as 20%, the most since November 2020, after the engine manufacturer’s full-year earnings and forecast topped expectations on all metrics Axa climbed 3.8%, the top performing stock on the Stoxx 600 Insurance Index, after the French insurer announced it could buy back up to €1.1 billion worth of shares HeidelbergCement rises as much as 3.1% as analysts say the outlook is positive for the German construction giant, noting diminishing energy cost headwinds from 2022 Accor shares rise as much as 2.8%, after the hospitality company reported full-year Ebitda and dividend per share that was ahead of analyst estimates Bouygues shares rise as much as 3.9%, after the French conglomerate posted what Citi analysts described as a “solid” set of numbers, with top line ahead of consensus and margin up Spectris rises as much as 7.6%, the most since April 2022, after the precision-measurement specialist released full- year results which Shore Capital says were a beat Anglo American drops as much as 2.8% after the mining giant revealed a significant writedown at its Woodsmith polyhalite project Munich Re slumped as much as 6.2%, the most since July, as analysts pointed to weaker underlying property and casualty underwriting despite an overall earnings beat for the German reinsurer Earlier in the session, Asian stocks snapped a two-day decline as traders focused on US economic data due Thursday, while shares in Hong Kong entered correction territory. The MSCI Asia Pacific ex Japan Index rose as much as 0.9%, before paring gains to 0.3% in afternoon trading. South Korean shares were among the biggest advancers in the region as the Bank of Korea paused rate hikes for the first time in a year. Meanwhile, Hong Kong’s Hang Seng Index fell into correction amid growing geopolitical concerns and doubts over the strength of China’s economy. Japan was closed for a holiday. The US will release data on economic growth, consumption and employment, providing more clues on the Fed’s policy path. The MSCI Asia gauge is trading about 6% lower than a peak reached in late January as investors assess higher bond yields and China’s path to recovery. Still, a gauge of tech stocks soared as the US 10-year Treasury yield eased toward 3.9% overnight, although it reversed the decline in the afternoon. Minutes of the latest Federal Reserve meeting showed that officials continued to anticipate further increases in borrowing costs, although most were in favor of smaller rate increases.  Fed’s Williams Says Fed’s 2% Inflation Goal Key to Taming Prices The FOMC “sounded hawkish at the margin,” Saxo Capital Markets strategists wrote in a note. “While this risk of a recession was noted, data since the meeting including the most recent PMI numbers this week have continued to ease recession concerns.” Australian stocks declined again, as the S&P/ASX 200 index fell 0.4% to close at 7,285.40, extending losses for a third day, dragged by mining shares and banks.  National carrier Qantas was among the day’s laggards after the airline flagged higher-than-expected spending on planes, while Eagers, the top performer, rallied after the Australian auto dealer said demand for new cars remains strong. In New Zealand, the S&P/NZX 50 index rose 0.8% to 11,888.50. Indian stocks ended lower after a volatile session as monthly derivative contracts expired on Thursday. The S&P BSE Sensex fell 0.2% to 59,605.80 in Mumbai, while the NSE Nifty 50 Index declined by a similar measure.  The gauges have now dropped for five straight sessions, the longest run of declines since Sept. 29. The benchmark Sensex has nearly erased its gains for February, while the Nifty has fallen to its lowest levels since Oct. 18. All but two of ten companies controlled by the Adani Group closed lower as concerns linger about the conglomerate’s corporate structure. Expiry of monthly options also weighed on the stocks.   India’s finance ministry on Thursday said that if predictions on the return of El Nino conditions are accurate, that could lead to a deficient monsoon, resulting in lower agricultural output and higher prices. Sixteen of 20 sector sub-gauges compiled by BSE Ltd. declined. Realty firms and utilities were the worst performers, while metal and services sector companies advanced. For the week, all but fast-moving consumer-goods companies have retreated. HDFC Bank contributed the most to the Sensex’s decline on Thursday, decreasing 0.7%. Out of 30 shares in the Sensex index, 13 rose and 17 fell. In FX, the BBG Dollar Index traded marginally weaker, having come off day’s lows; the New Zealand dollar and Australian dollar are vying for top sport among the G-10’s, while the pound was the worst. The euro edged lower, extending its slump into a fourth day, and touched 1.0587, the lowest since Jan. 6. The German yield curve twist-flattened very modestly. Three-week implied volatility in euro-dollar is up a third day for the first time this month as the tenor now captures the ECB meeting on March 16 and the release of US CPI data two days earlier The pound slumped. Gilts underperformed European peers, with yields rising around 3bps across the curve, as traders added to BOE pricing after policymaker Catherine Mann said more interest-rate rises are needed to clamp down on inflation as she dismissed talk of a looming “pivot” to easier monetary policy The Australian dollar climbed from a seven-week low as dip-buyers emerged and business spending beat estimates In rates, Treasuries were under pressure as US trading day begins, with yields still inside Wednesday’s ranges. UST yields are higher by as much as 2.4bp in 10-year sector; Wednesday’s ranges included YTD highs for most tenors; the 10Y TSY rose 4bps to 9.449%, near session highs. The week's auction cycle concludes with 7-year note sale at 1 p.m. New York time, last coupon auction until March 8 and poised to draw a record high yield.  WI 7-year yield 4.08%; record high stop was 4.027% in October.  In Europe, gilts underperformed their German counterparts after hawkish remarks from BOE policymaker Mann. UK 10-year yields are up 4bps while the German equivalent is up 2bps. Traders are now pricing in a Fed peak rate of 5.55% by July, compared with 4.90% they were betting on at the start of year. However, Fed officials haven’t grown more aggressive during this time: Fed Bank of St. Louis President Bullard reiterated his earlier stance, saying “I’m still at 5.375%.” Markets fully price in a 25 basis-point hike in March, but assign a 24% probability for a 50-point hike. In crypto, bitcoin is firmer on the session having successfully reclaimed the USD 24k mark after losing the figure on Wednesday, though it remains shy of recent USD 25k+ levels. In commodities, oil gained — after the longest run of losses this year — as traders took stock of a mixed demand outlook of tightening US monetary policy and China’s reopening. WTI rose 0.7% to trade near $74.45. Spot gold is little changed around $1,826. Looking to the day ahead now, and data releases include the final CPI release from the Euro Area in January, which came in just hotter than the Flash print, as well as the second estimate of US GDP in Q4. Otherwise, we’ll get the US weekly initial jobless claims, and the Kansas City Fed’s manufacturing index for February. Meanwhile from central banks, we’ll hear from the Fed’s Bostic and Daly, the ECB’s de Cos, and the BoE’s Cunliffe and Mann. Finally, today’s earnings releases include Booking Holdings and Moderna. Market Snapshot S&P 500 futures up 0.3% to 4,012.25 MXAP up 0.1% to 160.54 MXAPJ up 0.3% to 523.26 Nikkei down 1.3% to 27,104.32 Topix down 1.1% to 1,975.25 Hang Seng Index down 0.4% to 20,351.35 Shanghai Composite down 0.1% to 3,287.48 Sensex down 0.3% to 59,551.16 Australia S&P/ASX 200 down 0.4% to 7,285.40 Kospi up 0.9% to 2,439.09 STOXX Europe 600 little changed at 462.61 German 10Y yield little changed at 2.53% Euro down 0.1% to $1.0593 Brent Futures up 0.1% to $80.72/bbl Gold spot up 0.0% to $1,826.01 U.S. Dollar Index little changed at 104.62 Top Overnight News from Bloomberg The global economy is in a better place today than many predicted months ago, US Treasury Secretary Janet Yellen said Thursday, while reiterating her calls for support to Ukraine on the eve of the one-year anniversary of Russia’s invasion. BBG The EU and the US are close to an agreement on raw materials used in batteries that would allow EU companies access to some of the same benefits in President Joe Biden’s green investment plan as Washington’s free-trade partners, according to the bloc’s trade chief Valdis Dombrovskis. BBG Sweden’s government budget is likely to be in the red for the first time since the pandemic hit in 2020, as tax income is set to drop and large-scale electricity-price support weighs on finances, according to the National Debt Office. BBG Hong Kong’s CPI for Jan overshoots the St, coming in at +2.4% Y/Y (vs. the consensus forecast of +2.1% and up from +2% in Dec). BBG   BABA +4% pre mkt reported solid Q4 upside, including revenue +2% to RMB247.7B (vs. the St RMB245.8B), EBITDA +15% to RMB59.16B (vs. the St $RMB53.5B), and EPS +14% to RMB19.26 (vs. the St 16.57). Revenue upside was driven by the core China Commerce business along with Int’l Commerce and Cainiao Logistics while Local Consumer Services and Cloud Computing fell a bit short. During Q4 the company repurchased 45.4 million ADSs for approximately US$3.3 billion. They still have $21.3B left on the buyback (as of 12/31). BBG Chinese leader Xi Jinping is preparing to shake up the leadership of the country’s financial system, installing key associates to run the central bank and reviving a Communist Party body to tighten political control over financial affairs, according to people familiar with the discussions. WSJ Washington is considering releasing intelligence showing that China is considering supplying weapons to Russia as part of a campaign aimed at deterring Beijing from intervening militarily. WSJ South Korea’s central bank left rates on hold, as expected, joining the Bank of Canada as the second monetary authority to complete its hiking cycle. RTRS The European Commission has banned its staff from using the TikTok app on their work-issued devices, widening across the Atlantic a patchwork of similar, limited bans affecting U.S. officials. WSJ Europe’s final CPI for Jan was revised higher on core (from +5.2% to +5.3%) while the headline figure of +8.6% was kept unchanged. BBG The US oil buildup continued. Inventories bumped up by just under 10 million barrels last week for a ninth weekly increase, the API is said to have reported. That would take total holdings to the highest in 21 months if confirmed by the EIA. More bearish pressures: Brent's prompt timespread narrowed sharply yesterday, signaling a softer market, and the nearest spread for WTI indicates ample supply. BBG New York Federal Reserve Bank President John Williams on Wednesday said the U.S. central bank is "absolutely" committed to bringing inflation back down to its 2% target over the next few years, by bringing demand down in line with constrained supply. RTRS After peaking at $47.7 trillion in June, the total value of US homes declined by $2.3 trillion, or 4.9%, in the second half of 2022, according to real estate brokerage Redfin. That’s the largest drop in percentage terms since the 2008 housing crisis, when home values slumped by 5.8% from June to December. BBG A more detailed look at global markets courtesy of Newsquawk Asia-Pacific stocks lacked firm direction with price action mostly rangebound amid thinned conditions due to the holiday closure in Japan and following the mixed performance stateside where the major indices faded mild gains in the aftermath of the FOMC minutes. ASX 200 was the laggard with the index weakened by underperformance in the mining industry after recent declines in commodity prices and a slump in Rio Tinto’s profits, although losses were limited as participants also digested better-than-expected capex data. KOSPI was the biggest gainer amid recent currency weakness and after the BoK kept its rate unchanged for the first time in a year, as unanimously expected. Hang Seng and Shanghai Comp. were indecisive with stocks initially led higher by strength in tech and after China vowed to improve measures to cut taxes and fees, although the gains were briefly pared amid ongoing global frictions and the PBoC’s liquidity drain. Top Asian News BoK maintained its base rate at 3.5%, as expected, while it noted uncertainties surrounding the policy decision are high and it deemed it warranted to keep a restrictive policy stance for a considerable time. BoK Governor Rhee said board member Cho Yoon-Je dissented and that the decision should not be taken as indicating the tightening cycle is over. Furthermore, Rhee stated that five members wanted to keep the chance open for the terminal rate to reach 3.75% and that the decision was based on the expectation that inflation will head down from March, while he added that it is time to stop and watch if the inflation trend goes along the expected path. Chinese Commerce Ministry says the consumer market recovery momentum was strong in January, will take more measures to restore and expand consumption. China is to shake up its financial system, according to WSJ; Citic Group Chairman Zhu Hexin is reportedly the leading candidate for PBoC governor, according to sources. PLDT Said to Weigh Data Center Stake Sale After Spending Overrun Janus Henderson Bets Big on Hedge Funds, Alts After Outflows Astra Clinches Deal for China Drug to Boost Cancer Pipeline European bourses are firmer on the session with a hefty earnings docket dictating action after an uninspiring APAC handover, Euro Stoxx 50 +0.4%. However, the FTSE 100 -0.5% is the exception following pressure from Anglo American and BAE Systems post earnings, though this is offset a touch by marked outperformance in Rolls Royce. Stateside, futures are broadly-speaking in-fitting with Europe though the NQ +0.7% outperforms given tailwinds from NVIDIA's after-market update. Top European News BoE's Mann says failing to do enough now risks the worst of both worlds – the higher inflation and lower activity – as monetary policy will have to stay tighter for longer. Believe that more tightening is needed, and caution that a pivot is not imminent. In her view preponderance of turning points is not yet in the data. BoE should weigh inflation more highly in our reaction function. Adding, she does not think UK monetary policy is in a restrictive stance particularly. Axa Plans $1.2 Billion Buyback as Underlying Earnings Rise Ukraine Latest: EU Rushes on Sanctions; Russians Still Back War Eni Posts Record Annual Profit on High Oil and Gas Prices Apollo Mulls $750 Million First Boston Leveraged-Finance Bet EssilorLuxottica Falls After Profit Growth Slows in Second Half WPP CEO Says AI Already ‘Fundamental’ to Advertising Giant FX The DXY continues to grind higher at the top-end of 104.30-65 parameters to the mixed fortune of peers. Antipodeans are the modest outperformers with AUD benefitting from overnight data and NZD revisiting post-RBNZ highs amid commentary from Governor Orr; AUD/USD and NZD/USD printed peaks of 0.6841 and 0.6251 respectively. Despite modest upside following hawkish commentary from BoE's Mann, GBP is the incremental laggard vs USD, though Cable remains comfortably above 1.20 within 1.2015-74 boundaries. Elsewhere, EUR was unreactive to unsurprising upwards revisions to January's EZ HICP while the JPY is little changed ahead of domestic CPI and Ueda's Lower House appearance; pivoting 1.06 and 134.90 respectively. PBoC set USD/CNY mid-point at 6.9028 vs exp. 6.9028 (prev. 6.8759) Fixed Income Gilts are the incremental laggards post-Mann and down to a new 101.26 session low with the Sonia strip similarly dented; market pricing for a 25bp BoE hike in March is around the 95%, in-fitting with recent sessions. Within the EZ, the hawkish direction remains in-play with Bunds at the lower-end of 133.92 to 134.41 parameters; similarly, USTs are underpressure ahead of 7yr supply and commentary from non-voters Bostic and Daly. Commodities WTI and Brent April futures are consolidating following another hefty session of losses on Wednesday which saw both benchmarks settle lower by almost USD 2.50/bbl apiece. Nat Gas futures experienced modest divergence with TTF fairly contained while Henry Hub is firmer as attention turns to potential cold weather state-side ahead. Exxon posted USD 2.5bln after-tax earnings in Kazakhstan and produced 246k bpd there for 2022, while it alerted against potential risks of disruptions of Kazakhstan oil through the CPC pipeline. Spot gold has drifted towards the bottom of its intraday range as the Dollar picked up this morning, with the intraday low just under yesterday’s USD 1,823.56/oz trough Geopolitics Russian Defence Ministry accused Ukraine of planning to stage an 'armed provocation' in the near future against Transnistria, Moldova and noted that it is ready to respond to any changes in the situation, according to a Telegram and RIA news agency. Russian President Putin said Moscow will pay increased attention to bolstering the country's nuclear forces and will start mass deliveries of Zirkon sea-launched hypersonic missiles, according to Reuters. US President Biden said Russian President Putin's suspension of the New START treaty is a big mistake and is not very responsible, while Biden added that he does not read into Russian President Putin's comments that he's thinking of using nuclear weapons and sees no change in Russia's nuclear posture, according to an interview with ABC News. US mulls releasing intelligence on China's potential arms transfer to Russia, according to WSJ. Russian Defense Ministry plane has reportedly crashed near Belgorod, Russia, via AJA Breaking citing Tass. US Event Calendar 08:30: 4Q GDP Annualized QoQ, est. 2.9%, prior 2.9% 4Q Personal Consumption, est. 1.9%, prior 2.1% 4Q GDP Price Index, est. 3.5%, prior 3.5% 4Q PCE Core QoQ, est. 3.9%, prior 3.9% 08:30: Feb. Initial Jobless Claims, est. 200,000, prior 194,000 Feb. Continuing Claims, est. 1.7m, prior 1.7m 08:30: Jan. Chicago Fed Nat Activity Index, est. -0.25, prior -0.49 11:00: Feb. Kansas City Fed Manf. Activity, est. -2, prior -1 DB's Jim Reid concludes the overnight wrap Although markets have stabilised after Tuesday’s sell-off, the release of the FOMC minutes yesterday still led the S&P 500 (-0.16%) to lose ground for a 4th consecutive session, marking the longest run of declines of 2023 so far. Admittedly, the minutes were always going to feel a bit stale given the strong payrolls and CPI data as well as the upward revisions that have transpired since the meeting, but there were still some insights to be gleaned. In particular, they showed that “almost all” participants favoured downshifting to a 25bp hike, whilst “a few” still wanted a 50bp move. Furthermore, many on the committee “observed that a policy stance that proved to be insufficiently restrictive could halt recent progress in moderating inflationary pressures, leading inflation to remain above the Committee’s 2 percent objective for a longer period, and pose a risk of inflation expectations becoming unanchored.” That follows recent data prints indicating that policy may not yet be fully restrictive. And on financial conditions, the minutes noted that “a number of participants observed that financial conditions had eased in recent months, which some noted could necessitate a tighter stance of monetary policy." Following the minutes, pricing for the Fed’s terminal rate closed at its highest level of this cycle to date, with futures expecting a rate of 5.37% at the July meeting, ending the day up +0.5bps higher. Overall though, the curve was little changed, with the end-2023 rate for December down by -1.1bps to 5.18% by the close. In turn, that prompted US Treasuries to pare back their earlier gains, with the 10yr yield moving off its lows for the day prior to the minutes to only close down -3.7bps at 3.92%. Those swings were even more evident looking at the 2 year yield, which was down -7.1bps in the early US afternoon before spiking +4.1bps to end the day down -2.9bps at 4.69%. The perception that the minutes had a hawkish tilt meant that market-based measures of US inflation expectations moved lower in response, having been on a consistent run higher over recent weeks. For instance, at one point yesterday the 2yr inflation breakeven was on track to close above 3% for the first time in over 6 months, before closing -1.9bps lower at 2.97%. Bear in mind it was only on January 18 that it closed at 2.04%, so the last month has seen a serious reappraisal about the likely path of inflation over the next couple of years. That’s been echoed at longer time horizons as well, with the 10yr breakeven on track to close at its highest level since early November yesterday just ahead of the minutes, before falling -4.1bps to 2.60%. Ahead of the Fed minutes, we heard separately from St Louis Fed President Bullard who said in a CNBC interview that “I’m still at 5.375%” in terms of where he wanted to take rates. That would be 75bps above their current levels, and is roughly in line with where current market pricing is expecting terminal to get to. After the close, we then heard from New York Fed President Williams, who reiterated his previous stance that inflation would return to trend in the next “few years”. He noted that goods prices have come down, but not as quickly as he had hoped. He also echoed the FOMC minutes by emphasising they did not want the “inflation expectations anchor to slip.” When it comes to the Fed’s hiking cycle, another interesting datapoint came from the Mortgage Bankers Association, whose index of home-purchase applications fell to its lowest level since 1995 in the week ending February 17. That comes as mortgage rates have begun to rise again following their decline at the end of last year, with the MBA’s data for a 30-year contract showing rates have gone up by +44bps in the last two weeks, which is the biggest two-week increase since September. US equities had fluctuated between moderate gains and losses throughout the day, before moving lower following the FOMC minutes with the S&P 500 down -0.16%. The largest underperformers were mostly made up of cyclicals such as Real Estate (-1.02%), Transportation (-0.99%), and Energy (-0.77%), but also some defensives like Food & Staples (-1.15%). The best performers were led by Autos (+1.34%) due in large part to Tesla (+1.77%), and the NASDAQ (+0.13%) posted a modest gain as well. Over in Europe, markets had similarly put in a pretty subdued performance ahead of the Fed minutes, with the STOXX 600 down a further -0.33%. That said, this marked a recovery from its earlier lows, when it had been down -1.03% during the European morning before recovering into the afternoon. It was much the same story for bonds, with yields on 10yr bunds as high as 2.57% intraday before closing -0.8bps lower at 2.52%. Those more positive moves came as we had further evidence that the economic situation was improving in Europe with the release of the Ifo Institute’s latest business climate indicator for February. That rose to 91.1 in February (vs 91.2 expected), which marked its 4th consecutive monthly advance and is its highest level since June. The expectations component also hit a 1-year high of 88.5 (vs. 88.4 expected), although the current assessment dipped slightly to 94.1 (vs. 94.9 expected). Overnight in Asia, it’s a quieter session given the Japanese holiday today, but equity markets have remained subdued as in the US and Europe. For instance, the Hang Seng is up just +0.01% this morning, whilst the Shanghai Comp (-0.11%) and the CSI 300 (-0.11%) have both posted modest declines. The main exception to that pattern has come from the KOSPI (+1.01%), which follows the Bank of Korea’s decision to leave interest rates unchanged for the first time in a year, holding at 3.5%. The BoK’s Governor said that one member wanted a 25bp increase, and also that “I hope the hold this time isn’t going to be seen as meaning the rate-hike stance is over”. In response, the South Korean Won has strengthened by +0.62% against the US Dollar this morning. And looking forward, US equity futures are pointing to a better performance today, with those on the S&P 500 (+0.43%) and the NASDAQ 100 (+0.79%) posting decent gains. To the day ahead now, and data releases include the final CPI release from the Euro Area in January, as well as the second estimate of US GDP in Q4. Otherwise, we’ll get the US weekly initial jobless claims, and the Kansas City Fed’s manufacturing index for February. Meanwhile from central banks, we’ll hear from the Fed’s Bostic and Daly, the ECB’s de Cos, and the BoE’s Cunliffe and Mann. Finally, today’s earnings releases include Booking Holdings and Moderna. Tyler Durden Thu, 02/23/2023 - 08:02.....»»

Russia is spending millions upgrading bomb shelters across the country in a project that started as it launched its invasion of Ukraine. People walk along a passageway in an underground shelter in Moscow, Russia, in June 2007.NATALIA KOLESNIKOVA/AFP via Getty Images Russia has spent the last year upgrading old Soviet-era bomb shelters, The Moscow Times reported. Shelters that have not been used for decades are now being made fit for use, per the report. Putin says Ukraine could attack Russia, and has put the country on nuclear alert. Russia has been repairing and upgrading thousands of Soviet-era bomb shelters over the past year, ever since it invaded Ukraine, current and former officials told The Moscow Times. The Kremlin ordered inspections and repairs of bomb shelters across the country in February 2022, the same month that Russia launched its invasion, with work still ongoing, a current Russian official told the outlet."A decision to inspect the network of bomb shelters was made by the government in the spring," the official said, adding that the order came from ministries including the Emergency Situations Ministry and the Defense Ministry.Other current and former officials confirmed the work to The Moscow Times, which also viewed government tenders for bomb shelter upgrades.The upgrades come as Russian President Vladimir Putin has repeatedly warned of retaliation if anywhere in Russia is targeted, and after he put his own country's nuclear forces on high alert.Work on the shelters has been happening quietly, without any public announcements. Authorities appear to be spending hundreds of millions of rubles – the equivalent of millions of dollars — The Moscow Times reported.Thousands of shelters which have not been used for decades are being made fit for use.The outlet also pointed to other media reports that showed authorities spending large sums on shelters across the country.Some cities don't have enough shelter space for their populations, it added, pointing to a report that said officials in the northern city of Petrozavodsk warned in January that public shelters there could only take one-eighth of the city's residents.Russia on alertWhile Ukraine has repeatedly pledged not to strike Russian territory, saying it only wants to protect its own soil, Putin has warned that Russia could be targeted, and that it would retaliate if it does.Ukraine's allies, which are supplying the country with increasingly sophisticated weapons, have also sought assurances from Ukraine that it would not use those weapons to strike Russian territory.Meanwhile, Putin has repeatedly threatened to use nuclear weapons if provoked, sparking outcry and condemnation from the US.Putin may preparing for such an eventuality, and any repercussions, or at least trying to reassure his officials and civilians that Russia is prepared.Putin has described his invasion of Ukraine as being necessary to stop the West attacking Russia.Read the original article on Business Insider.....»»

Michael Hudson: A Roadmap To Escape The West's Stranglehold Authored by Pepe Escobar via The Cradle, The geoeconomic pathway away from the neoliberal order is fraught with peril, but the rewards in establishing an alternative system are as promising as they are urgent It is impossible to track the geoeconomic turbulence inherent to the “birth pangs” of the multipolar world without the insights of Professor Michael Hudson at the University of Missouri, and author of the already seminal The Destiny of Civilization. In his latest essay, Professor Hudson digs deeper into Germany’s suicidal economic/financial policies; their effect on the already falling euro – and hints at some possibilities for fast integrating Eurasia and the Global South as a whole to try to break the Hegemon’s stranglehold. That led to a series of email exchanges, especially about the future role of the yuan, where Hudson remarked: “The Chinese whom I’ve talked to for years and years did not expect the dollar to weaken. They’re not crying about its rise, but they are concerned about flight capital from China as I think after the Party Congress [starting on October 16] there will be a crackdown on the Shanghai free-market advocacy. Pressure for the coming changes has been long building up. The spirit of reform to rein in ‘free markets’ was spreading among students over a decade ago, and they have been rising in the Party hierarchy.” On the key issue of Russia accepting payment for energy in rubles, Hudson touched upon a point rarely examined outside of Russia: “They don’t really want to be paid just in rubles. That’s the one thing Russia doesn’t need, because it can just print them. It only needs rubles to balance its international payments to stabilize the exchange rate – not to push it up.” Which brings us to settlements in yuan: “Taking payment in yuan is like taking payment in gold – an international asset that every country desires as a non-fiat currency that has a value if one sells it (unlike the dollar now, which may simply be confiscated, or ultimately left abandoned). What Russia really needs are critical industrial inputs like computer chips. It could ask China to import these with the yuan Russia provides.” Keynes is back Following our email exchanges, Professor Hudson gracefully agreed to answer in detail a few questions about the extremely complex geoeconomic processes in play across Eurasia. Here we go. The Cradle: The BRICS are studying the adoption of a common currency – including all of them and, we expect, the expanded BRICS+ as well. How could that be practically implemented? Hard to see the Brazilian Central Bank harmonizing with the Russians and the People’s Bank of China. Would that involve only investment – via the BRICS development bank? Would that be based on commodities + gold? How does the yuan fit in? Is the BRICS approach based on the current Eurasia Economic Union (EAEU) discussions with the Chinese, led by Sergey Glazyev? Did the Samarkand summit advance, practically, the interconnection of BRICS and the SCO? Hudson: “Any idea of a common currency has to start with a currency-swap arrangement among existing member countries. Most trade will be in their own currencies. But to settle the inevitable imbalances (balance-of-payments surpluses and deficits), an artificial currency will be created by a new Central Bank. This may look superficially like the Special Drawing Rights (SDRs) created by the International Monetary Fund (IMF), largely to fund the US deficit on military account and the rising debt service owed by Global South debtors to US lenders. But the arrangement will be much more like the ‘bancor’ proposed by John Maynard Keynes in 1944. Deficit countries could draw a specified quota of bancors, whose valuation would be set by a common selection of prices and exchange rates. The bancors (and their own currency) would be used to pay countries in surplus. But unlike the IMF’s SDR system, the aim of this new alternative Central Bank will not be simply to subsidize economic polarization and indebtedness. Keynes proposed a principle that if a country (he was thinking of the United States at the time) ran chronic surpluses, that would be a sign of its protectionism or refusal to support a mutually resilient economy, and its claims would begin to be extinguished, along with the bancor debts of countries whose economies prevented their ability to balance their international payments and support their currency. Today’s proposed arrangements would indeed support lending among the member banks, but not for the purpose of supporting capital flight (the main use of IMF loans, when “left-wing” governments seem likely to be elected), and the IMF and its associated alternative to the World Bank would not impose austerity plans and anti-labor policies on debtors. The economic doctrine would promote self-sufficiency in food and basic essentials, and would promote tangible agricultural and industrial capital formation, not financialization. It is likely that gold also would be an element of international monetary reserves by these countries, simply because gold is a commodity that hundreds of years of world practice already have agreed on as acceptable and politically neutral. But gold would be a means of settling payments balances, not defining domestic currency. These balances would of course extend to trade and investment with western countries that are not part of this bank. Gold would be an acceptable means of settling western debt balances to the new Eurasian-centered bank. That would prove a vehicle for payments that western countries could not simply repudiate – as long as the gold was kept in the hands of the new bank members, no longer in New York or London as has been the dangerous practice since 1945. In a meeting to create such a bank, China would be in a similar dominant position to that which the United States enjoyed in 1944 at Bretton Woods. But its operating philosophy would be quite different. The aim would be to develop the economies of bank members, with long-term planning or trade patterns that seem most appropriate for their economies to avoid the kind of dependency relationships and privatization takeovers that have characterized IMF and World Bank policy. These development objectives would involve land reform, industrial and financial restructuring, and tax reform, as well as domestic banking and credit reforms. Discussions at the SCO meetings seem to have prepared the ground for establishing a general harmony of interests in creating reforms along these lines.” Eurasia or bust The Cradle: In the medium term, is it feasible to expect German industrialists, contemplating the coming wasteland, and their own demise, to revolt en masse against the NATO-imposed trade/financial sanctions against Russia, and force Berlin to open Nord Stream 2? Gazprom guarantees the pipeline is recoverable. Don’t need to join the SCO to make that happen… Hudson: “It is unlikely that German industrialists will act to prevent their country’s de-industrialization, given the US/NATO stranglehold on Eurozone politics and the past 75 years of political meddling by US officials. German company heads are more likely to try and survive with as much personal and corporate wealth intact as they can in the wake of Germany being turned into a Baltic-state-type economic wreckage. There already has been talk of shifting production – and management – to the United States, which will block Germany from obtaining energy, metals and other essential materials from any supplier not controlled by US interests and their allies. The great question is whether German companies would emigrate to the new Eurasian economies whose industrial growth and prosperity seem likely to far overshadow that of the United States. Of course the Nord Stream pipelines are recoverable. That is precisely why US political pressure from Secretary of State Blinken has been so insistent that Germany, Italy and other European countries double down on isolating their economies from trade and investment with Russia, Iran, China and other countries whose growth the US is trying to disrupt.” How to escape “There Is No Alternative” The Cradle: Are we reaching the point when the key players of the Global South – over 100 nations – finally get their act together and decide to go for broke and stop the US from keeping the artificial neoliberal global economy in a state of perpetual coma? This means the only possible option, as you have outlined, is to set up a parallel global currency bypassing the US dollar – while the usual suspects float the notion of a Bretton Woods III at best. Is the FIRE (finance, insurance, real estate) financial casino omnipotent enough to smash any possible competition? Do you envisage any other practical mechanisms apart from what is being discussed by BRICS/ EAEU/ SCO?  Hudson: “A year or two ago it seemed that the task of designing a full-fledged alternative world currency, monetary, credit and trading system was so complex that the details hardly could be thought through. But US sanctions have proved to be the needed catalyst to make such discussions pragmatically urgent. The confiscation of Venezuela’s gold reserves in London and its US investments, the confiscation of $300 billion of Russia’s foreign-exchange reserves held in the United States and Europe, and its threat to do the same to China and other countries resisting US foreign policy has made de-dollarization urgent. I have explained the logic in many points, from my Valdai Club article (with Radhika Desai) to my recent book on The Destiny of Civilization, the lecture series that I prepared for Hong Kong and the Global University for Sustainability. Holding securities denominated in dollars, and even holding gold or investments in the United States and Europe, is no longer a safe option. It is clear that the world is breaking into two quite different types of economies, and that US diplomats and their European satellites are willing to tear up the existing economic order in hopes that creating a disruptive crisis will enable themselves to come out on top. It also is clear that subjugation to the IMF and its austerity plans are economic suicide, and that following World Bank and its neoliberal doctrine of international dependency is self-destructive. The result has been to create an unpayable overhead of debts denominated in US dollars. These debts cannot be paid without borrowing credit from the IMF and accepting terms of economic surrender to US privatizers and speculators. The only alternative to imposing economic austerity on themselves is to withdraw from the dollar trap in which US-sponsored “free market” economics (markets free from government protection, and free from government ability to recover the environmental damage from US oil companies, mining companies and the associated industrial and food dependency) is to make a clean break. The break will be difficult, and US diplomacy will do everything it can to disrupt the creation of a more resilient economic order. But US policy has created a global state of dependency in which literally There is no alternative but to break away.” Germanexit? The Cradle: What is your analysis on Gazprom confirming Line B of the Nord Stream 2 was not touched by Pipeline Terror? This means Nord Stream 2 is practically ready to go – with a capacity to pump 27.5 billion cubic meters of gas a year, which happens to be half of the total capacity of – damaged – Nord Stream. So Germany is not doomed. This opens a whole new chapter; a solution will depend on a serious political decision by the German government.    Hudson: “Here’s the kicker: Russia certainly won’t bear the cost again, only to have the pipeline blown up. It will be up to Germany. I bet the current regime says “No.” That should make for an interesting rise of the alternative parties. The ultimate problem is that the only way Germany can restore trade with Russia is to withdraw from NATO, realizing that it is the major victim of NATO’s war. This could only succeed by spreading to Italy, and also to Greece (for not protecting it against Turkey, ever since Cyprus). That looks like a long fight. Maybe it’s easier just for German industry to pack up and move to Russia to help modernize its industrial production, especially BASF for chemistry, Siemens for engineering, etc.. If German companies relocate to the US to get gas, this will be perceived as a US raid on German industry, capturing its lead for the US. Even so, this won’t succeed, given America’s post-industrialized economy. So German industry can only move eastward if it creates its own political party as a nationalistic anti-NATO party. The EU constitution would require Germany to withdraw from the EU, which puts NATO interests first at the federal level. The next scenario is to discuss Germany’s entry into the SCO. Let’s take bets as to how long that will take.” Tyler Durden Sun, 10/09/2022 - 23:30.....»»

Russia has been reducing natural-gas flows to Europe, which is now nervous Russia will cut off gas flows completely ahead of winter. Russian President Vladimir Putin has warned of "catastrophic consequences" for the global energy markets if more sanctions are imposed on the country.ALEXEY DANICHEV/SPUTNIK/AFP via Getty Images Russia is waging a war against Ukraine and an energy war against the West, said a Ukraine official. Europe is nervous that Russia will cut natural-gas flows completely as supplies have slowed. But the official thinks Putin is bluffing about cutting supplies, because Russia is running out of storage. Russia is waging two simultaneous wars — one against Ukraine and an energy war against the West, a Ukrainian government official said on Monday.Olena Zerkal, an adviser to Ukraine's energy minister, made the remark during a panel discussion at Chatham House, a London-based think tank.Russia has been reducing natural-gas flows to Europe over the last few months, citing reasons such as energy companies' refusal to pay in rubles and an equipment hold-up in Canada. In 2021, Europe accounted for roughly 75% of Russia's natural-gas exports. Now, Europe is nervous Russia could cut off gas flows completely in retaliation for the sweeping sanctions it's been hit with over the Ukraine war.Europe depends on Russia for 40% of its total natural-gas needs, from cooking in homes to firing power stations, and most of this is delivered via pipeline.Last week, Russian President Vladimir Putin said there would be "catastrophic consequences" for the global energy markets if more sanctions were imposed on Russia.But Ukraine's Zerkal said Putin is posturing, as the natural-gas supply cannot be simply turned on and off."Their underground storages are full," she said, according to a transcript of the panel discussion reviewed by Insider. "Yes, they may burn all this amount of gas, but they can burn Siberia with all this amount of gas. Otherwise, they will need to send this gas back to Europe."Russian energy expert Margarita Balmaceda told the "Marketplace Morning Report" in March that "somebody like Putin loves the optics of closing the pipeline, closing the supply spigot — but in reality, natural gas doesn't really work like that.""You cannot really stop producing natural gas so quickly. And if you do not have somewhere to store natural gas that you have already produced, your only choice is either to let it flare in the air, or to continue shipping it," Balmaceda said on the radio show. She was referring to a controlled burning of the fuel that releases it into the atmosphere.Zerkal said Russia is "very limited in their possibilities to proceed with this bluff," per The National.Germany — Europe's top economy — is also aware that it would be challenging for the Kremlin to simply turn the natural-gas taps off. German economy minister Robert Habeck said the key natural-gas pipeline that carries the fuel from Russia to Europe "is not like a water tap," the AFP reported on Monday.Even so, Germany is nervous that Russia won't turn the key Nord Stream 1 pipeline back on after shutting it down on Monday for a scheduled 10-day maintenance. Berlin is already telling people to conserve energy."Everything is possible, everything can happen," German Economy Minister Robert Habeck told Deutschlandfunk radio on Saturday, according to a Guardian translation. "It could be that the gas flows again, maybe more than before. It can also be the case that nothing comes."Read the original article on Business Insider.....»»

Gazprom has already cut off gas supply to the Netherlands, Poland, Bulgaria, and Finland, as they have all refused to pay in rubles. Russian President Vladimir Putin has demanded ruble payments for the country's natural-gas supply.Getty Images Gazprom said it would halt its natural-gas supply to Shell, which supplies Germany. The suspension from June 1 is due to Shell's refusal to pay for supplies in rubles, Gazprom said. On March 31, Russian President Putin demanded natural gas payments be made in rubles. Russian energy-giant Gazprom is set to halt its natural-gas supply to Shell, which supplies fuel to Germany, Europe's largest economy. The move comes after Shell refused to pay Gazprom in rubles.Gazprom made the announcement on Tuesday — the same day it cut off natural-gas supplies to the Netherlands for the same reason.In a March 31 decree, Russian President Vladimir Putin demanded that natural-gas payments be made in rubles, which would entail opening a euro and ruble account with Gazprombank in Moscow to process payments.Shell Energy Europe has notified Gazprom "it does not intend to make payments under the contract for the supply of gas to Germany in rubles," Gazprom said in its Telegram channel."As of the end of the business day on May 31 (the payment deadline stipulated by the contract), Gazprom Export had not received payment from Shell Energy Europe Limited for gas supplies in April," the Russian company wrote."Gazprom Export notified Shell Energy Europe Limited of the suspension of gas supplies under this contract from June 1, 2022" — until payment is made in rubles, the Russian company continued.Gazprom supplies up to 1.2 billion cubic meters of natural gas a year to Shell. That's just 2.6% of the 95 billion cubic meters of natural gas Germany consumes each year, according to the country's economy ministry. While Shell has refused to pay Gazprom in rubles, Germany's major natural-gas importers Uniper and DWE have paid for Russian fuel under Moscow's new payment plan, Reuters reported on Tuesday.Uniper is the largest importer of Russian gas in Germany. It depends on Russia for more than half of its natural-gas needs, according to Bloomberg. The German energy giant is also the country's largest gas import and storage company, per the media outlet.Potential for a 'significant recession'Germany could fall into a "significant recession" if supplies of Russian natural gas and oil are cut off, a top banker said in April. The economic powerhouse is heavily reliant on Russian gas, which accounted for 55% of Germany's gas imports in 2021 and 40% of its gas imports in the first quarter of 2022, Reuters reported. Germany's economy ministry did immediately not respond to Insider's request for comment sent outside regular business hours. A spokesperson for the German government told CNN on Tuesday it was "monitoring the situation very closely." Shell did not immediately respond to Insider's request for comment but told Reuters it "has not agreed to new payment terms set out by Gazprom." The energy giant has also not opened any special accounts to process the ruble payments."We will work to continue supplying our customers in Europe through our diverse portfolio of gas supply," Shell added to Reuters.On Tuesday, Gazprom said it has fully suspended gas supplies to GasTerra due to the Dutch trader's "failure to pay in rubles."In neighboring Denmark, power company Orsted is also warning about a Gazprom natural-gas supply cut as it, too, is refusing to pay in rubles. Orsted's ruble payment was due on Tuesday.Gazprom has already cut off gas supply to Poland, Bulgaria and Finland, as they have all refused to pay in the Russian currency.Read the original article on Business Insider.....»»

It cuts Russia off from a major importer, as the EU imported two-thirds of its oil from the country, European Council President Charles Michel said. President of the European Council Charles Michel at the special EU summit on May 30, 2022.Nicolas Economou/NurPhoto via Getty Images Russia stands to lose billions a year following the EU ban on importing its oil, Bloomberg reported. The EU imported two-thirds of its oil from the country, the President of the European Council said. The ban could cost Russia up to $10 billion annually, according to Bloomberg's calculation.  The EU's decision to ban Russian oil imports by the end of 2022 could cost the country $10 billion each year, Bloomberg reported.The deal, reached late Monday after months of negotiation, will sever Russia from a huge source of financing, as the EU imported two-thirds of its oil from the country, according to Charles Michel, President of the European Council."This immediately covers more than 2/3 of oil imports from Russia, cutting a huge source of financing for its war machine," Michel tweeted Monday. "Maximum pressure on Russia to end the war."Bloomberg calculated that this ban could cost Russia up to $10 billion a year in lost exports.The ban marks the latest punitive measure against Russia over its invasion of Ukraine in February. The EU has imposed a sweeping set of sanctions against the country, including a ban on importing its iron and steel.Michel said Monday's sanction package also includes cutting Russia's largest bank, Sberbank, off from Swift, the global financial payment system; a ban on an additional three Russian state-owned broadcasters; and sanctioning people the EU believes are responsible for war crimes in Ukraine.On Tuesday, Russian energy giant Gazprom said it would cut natural-gas supply to the Netherlands after Dutch trader GasTerra refused to pay it in rubles. GasTerra said the move would breach EU sanctions on Russia.In neighboring Denmark, power company Orsted acknowledged Monday a "risk that Gazprom Export will stop supplying gas to Orsted" as it too is refusing to pay in rubles.Read the original article on Business Insider.....»»

Dutch trader GasTerra and Danish power company Orsted have both refused to comply with Putin's demand to pay for Russian natural gas in rubles. The Netherlands and Denmark face natural gas supply cuts from Gazprom as they have rejected Russian President Vladimir Putin's demand for payments in rubles.Dennis Grombkowski/Getty Images Gazprom said it has cut natural-gas supply to the Netherlands after Dutch trader GasTerra refused to pay in rubles. That's after Russian President Putin has demanded natural gas payments in rubles. Denmark's Orsted has also rejected the demand and warns its supplies from Gazprom could be cut. Russian energy giant Gazprom said it has cut natural gas supply to Netherlands on Tuesday, after Dutch trader GasTerra refused to make payments in rubles.In a March 31 decree, Russian President Vladimir Putin demanded that natural-gas payments be made in rubles, which would entail opening a euro and ruble account with Gazprombank in Moscow to process payments."GasTerra will not go along with Gazprom's payment demands," said GasTerra, which is partly owned by the state and trades on behalf of the government."This is because to do so would risk breaching sanctions imposed by the EU and also because there are too many financial and operational risks associated with the required payment rout," the Dutch company wrote in a press release on Monday. "In particular, opening accounts in Moscow under Russian law and their control by the Russian regime pose too great a risk."Gazprom said on Tuesday it has fully suspended gas supplies to GasTerra "due to failure to pay in rubles."The Dutch government said it understands GasTerra's decision not to comply with Gazprom's demand to pay in rubles."This decision has no consequences for the physical supply of gas to Dutch households," Dutch Climate and Energy Minister Rob Jetten said on Twitter on Monday. The Netherlands relies on Russia for about 15% of its gas supplies, per Reuters.The Dutch government says on its website that the country has enough gas reserves for the short term and plans to import more liquefied natural gas from countries other than Russia.Denmark could be nextIn neighboring Denmark, power company Orsted is also warning about a Gazprom natural gas supply cut as it too is refusing to pay in rubles."We have no legal obligation under the contract to do so, and we have repeatedly informed Gazprom Export that we will not do so," Orsted said in a Monday press release.As Orsted intends to continue paying in euros for a payment due Tuesday, "there is a risk that Gazprom Export will stop supplying gas to Orsted," said the power company.Orsted said it expects to be able to buy gas on the European gas market. Both Netherlands and Denmark also produce their own natural gas.The Danish Energy Agency said in a Monday press release it doesn't expect any immediate impact from a natural gas supply cut by Gazprom and has an emergency plan ready.Gazprom did not immediately respond to Insider's request for comment.Gazprom has already cut off gas supply to Poland, Bulgaria and Finland, as they have all refused to pay in rubles.Not all of Europe is ready to go off Russian natural gas right now. Some major buyers like Italy's Eni and Germany's Uniper have opened accounts at Gazprombank to meet Russian payment demands.Read the original article on Business Insider.....»»

Dutch trader GasTerra and Danish power company Orsted have both refused to comply with Putin's demand to pay for Russian natural gas in rubles. The Netherlands and Denmark face natural gas supply cuts from Gazprom as they have rejected Russian President Vladimir Putin's demand for payments in rubles.Dennis Grombkowski/Getty Images Gazprom is set to cut natural-gas supply to the Netherlands as Dutch trader GasTerra has refused to pay in rubles. That's after Russian President Putin has demanded natural gas payments in rubles. Denmark's Orsted has also rejected the demand and warns its supplies from Gazprom could be cut. Russian energy giant Gazprom is set to cut natural gas supply to Netherlands on Tuesday, as Dutch trader GasTerra has refused to make payments in rubles.In a March 31 decree, Russian President Vladimir Putin demanded that natural-gas payments be made in rubles, which would entail opening a euro and ruble account with Gazprombank in Moscow to process payments."GasTerra will not go along with Gazprom's payment demands," said GasTerra, which is partly owned by the state and trades on behalf of the government."This is because to do so would risk breaching sanctions imposed by the EU and also because there are too many financial and operational risks associated with the required payment rout," the Dutch company wrote in a press release on Monday. "In particular, opening accounts in Moscow under Russian law and their control by the Russian regime pose too great a risk."In response, Gazprom has announced that it will discontinue natural gas supply go GasTerra from Tuesday, according to the Dutch company.The Dutch government said it understands GasTerra's decision not to comply with Gazprom's demand to pay in rubles."This decision has no consequences for the physical supply of gas to Dutch households," Dutch Climate and Energy Minister Rob Jetten said on Twitter on Monday. The Netherlands relies on Russia for about 15% of its gas supplies, per Reuters.The Dutch government says on its website that the country has enough gas reserves for the short term and plans to import more liquefied natural gas from countries other than Russia.Denmark could be nextIn neighboring Denmark, power company Orsted is also warning about a Gazprom natural gas supply cut as it too is refusing to pay in rubles."We have no legal obligation under the contract to do so, and we have repeatedly informed Gazprom Export that we will not do so," Orsted said in a Monday press release.As Orsted intends to continue paying in euros for a payment due Tuesday, "there is a risk that Gazprom Export will stop supplying gas to Orsted," said the power company.Orsted said it expects to be able to buy gas on the European gas market. Both Netherlands and Denmark also produce their own natural gas.The Danish Energy Agency said in a Monday press release it doesn't expect any immediate impact from a natural gas supply cut by Gazprom and has an emergency plan ready.Gazprom did not immediately respond to Insider's request for comment.Gazprom has already cut off gas supply to Poland, Bulgaria and Finland, as they have all refused to pay in rubles.Not all of Europe is ready to go off Russian natural gas right now. Some major buyers like Italy's Eni and Germany's Uniper have opened accounts at Gazprombank to meet Russian payment demands.Read the original article on Business Insider.....»»

The Czech Republic, Poland, and Bulgaria are the latest to say they have energy reserves, moving them towards independence from Russia's supply. A gas processing plant in the Yarakta Oil Field, owned by Irkutsk Oil Company (INK) in Russia, March 11, 2019.Vasily Fedosenko/Reuters A handful of EU countries say they have adequate reserves to wean themselves off Russian energy. But a bloc-wide embargo on Russian supplies is a long way off, and must be unanimously backed. Germany, Poland, and Bulgaria have all signaled moves away from reliance on Russia for energy. As EU countries scramble to wean themselves off Russian energy, a trickle of member states have signaled that they are finding alternative sources of oil, coal, or gas, and won't need to rely on Russia for long.Russia's invasion of Ukraine on February 24 kick-started long-stagnating efforts to reduce the bloc's Russian energy dependence. But that dependence is profound — Russia supplied 41% of EU natural gas in 2019, the BBC reported.Poland and Bulgaria issued defiant statements this week after Russia cut off their gas supply. Both countries, while heavily dependent on Russian energy, said they could source enough alternatives on Wednesday."Bulgaria will not negotiate under pressure and with its head bowed," said Bulgarian energy minister Alexander Nikolov, per local news outlet Novinite. "Bulgaria does not give in and is not sold at any price at any trade counterparty." Austria's government also said Wednesday that it would continue buying Russian energy, but is scrambling for alternative sources to fill its needs, per Reuters.The next day, the Czech Republic's Prime Minister Petr Fiala said that the country has oil for three months, gas for two months, as well as nuclear reserves for two years, according to Czech outlet iROZHLAS. But while it does not buy directly from Russia's Gazprom, it is heavily dependent on energy sold by Russia through western markets, the outlet reported.Latvia, Estonia, and Lithuania were the first EU countries to cut themselves off from Russian gas on April 1, using underground Latvian reserves to satisfy demand, according to Euractiv. Days later, Finland announced it was on track to replace Russian gas sources by fall, Euractive also reported.On Wednesday, German officials signaled that the country is readying to stop buying Russian oil, as long as it is given enough time to secure alternatives, per The Wall Street Journal.A total embargo won't happen overnightFor those countries without immediate alternatives, the transition to is unlikely to happen quickly — Germany, for example, relies on Russia for around a third of its gas, according to Reuters. And while Germany has an outsize influence in the European bloc, all 27 member states must agree to a full ban, and some are dragging their heels.Hungary, whose authoritarian leader Viktor Orbán is broadly loyal to Putin, is one of the countries most dependent on Russian natural gas. Orbán also suggested that he would accede to a key Russian demand of paying Gazprom, Russia's major gas supplier, in rubles for its supply, Deutsche Welle reported.And the question remains whether — even with the US and the EU united in their refusal to buy Russian energy in wartime — any ban can be truly effective.A report released Wednesday by Brussels-based economic think tank Breugel said it won't be.So far, the group wrote, higher prices caused by the change in demand from Europe have more than compensated for Russia's losses. "Only an immediate and full embargo would drastically cut Putin's revenues," the group wrote. This, it said, is unlikely given that major economies like China show no sign of participating. The group instead recommended energy import tariffs that can be adjusted to exert economic pressure on Russia.Read the original article on Business Insider.....»»

Ukraine War Revives Supply Chain Crisis By Maartjie Wijffelaars and Erik-Jan van Harn of Rabobank Summary The Ukraine war has sparked another supply chain crisis, just as pandemic-related disruptions had started to ease. Europe depends on Russia, Ukraine and Belarus for its energy imports, but also for some chemicals, oilseeds, iron and steel, fertilizers, wood, palladium and nickel, amongst others. Especially the energy dependency is a vulnerability, now that Russia is demanding ruble payments for its exports. It is unlikely that Europe would be able to fully replace Russian gas in the short term, whilst most of the Russian oil and solid fossil fuels could be replaced. Besides energy goods, disrupted supply of pig iron and several other iron and steel products, nickel and palladium will likely have the largest impact on EU industry. EU supply chains could also be distorted via war-related production disruptions in third countries. The EU could face challenges in importing e.g. electronic circuits from third countries, as these require inputs such as nickel and neon gas sourced from the warzone. Germany and Italy are relatively vulnerable to the crisis because of their relatively large industrial sectors, strong reliance on Russian energy, and in case of Italy strong reliance on Russia and Ukraine for certain iron and steel imports and gas in its total energy mix Will we ever catch our breath? Just as supply chain issues caused by the pandemic were starting to ease (Figure 1), the next crisis has presented itself. The war in Ukraine is making clear that large parts of the world depend on Russia, Ukraine and Belarus for basic necessities such as food, energy and other commodities. Trade with Russia, Belarus and Ukraine (referred to as the warzone in the remainder of this piece) has come close to a halt due to a wide range of sanctions, self-sanctioning (mainly by western companies), and strongly disrupted production and transport in Ukraine. Although the overall share in world trade is limited for those countries, trade disruptions can have large implications for both specific firms and industries as well as entire economies. Disruptions (both actual and feared) to imports from the warzone will hurt the EU more than less exports to the warzone. Not only because the warzone accounts for a larger share in the EU’s imports than exports (Figure 2), but especially because less imports of commodities and intermediate products can have knock-on effects on multiple production processes in the EU. In Part I of this research note we will zoom in on the EU’s direct and indirect dependence on non-food commodities and goods imported from the warzone. We will assess which EU industry subsectors are most vulnerable for the disruptions caused by the war. In Part II we compare the vulnerability of the largest Eurozone countries. The revival of supply chain disruptions On top of oil and gas, Russia, Belarus and Ukraine are producers of a number of key commodities that are used in everyday items or in the production thereof– such as pig iron, palladium and neon. Next to commodities, certain industries also depend on these countries for intermediate products. A striking example is the dependence of several German car factories on certain car parts produced in Ukraine. This has already led to the closure of several German car factories. We can split up the effects on supply chains into first order and second order effects. First order effects are caused by a reduction in direct trade between the warzone and the European Union. There are two types of second order effects. The first is less trade between the warzone and third countries that results in fewer supply of products to the EU from those third countries. The second  is less EU production of intermediate goods due to higher energy prices -or even shortages- as a result of the war and, consequently, less production of downstream goods for which these intermediates serve as inputs (Figure 3). Part I: EU dependence on goods from the warzone We start our analysis by looking for products for which the EU27 depends heavily on Russia, Ukraine and Belarus. We then omit those products that can easily be imported from other parts of the world and those which do not play a vital economic role. For example, Germany is quite dependent on Russia for raw fur skins, but it is safe to say that Germans and the German economy will survive without fur coats. Table 1 lists the most exposed vital economic goods based on these principles, with a minimum net import volume of EUR1bn. In the table we have aggregated certain product lines that came out on top in this analysis, to prevent getting lost in too much detail. Note that the row ‘chemicals’, for example, does not encompass all chemicals, yet only those that fulfil the above criteria. A list of the specifics for each product group can be found in the appendix. Apart from food products, the EU extensively depends on the warzone for several energy goods, chemicals, fertilizers, and metals – such as iron, nickel and palladium. And apart from, perhaps, chemicals, it seems rather difficult for the EU to find alternative suppliers for these goods and will likely at least cause price rises. Below we will elaborate on usages and the consequences of reduced availability of the non-agri products listed in table 1 and where necessary, on specific products within those product groups. We also give some indication on the relative ease or difficulty to substitute these products. All in all, we find that many sectors are likely to face disruptions to the supply of inputs and/or higher prices thereof. Most vulnerable seem to be production of basic metals and fabricated metal products. Other sectors that will certainly be impacted as well are construction, machinery and equipment, and transport equipment. EU dependence on Russian energy The most obvious link with Russia is on the part of energy commodities. The EU relies on Russia for 21% of its oil imports, 37% of its gas imports and roughly 45% of its solid fossil fuels imports. Energy imports are not yet subject to outright sanctions in the EU and are still flowing, but the possibility of sanctions is talk of the town. In any case, fear of reputational damage and of accidently breaching sanctions has already led to some reduction of Russian oil imports in the EU. Meanwhile, Russia is demanding ruble payments for its exports, which the EU is currently refusing to pay. For the time being, Gazprombank will help European companies to convert their euro payments to rubles, but it is still possible that gas deliverance will be weaponized. Finally, the EU has presented a plan to cut back on Russian energy dependence over the coming year(s). In other words, it is useful to dive into the EU’s dependence on Russian energy, to grasp if we could do without. Not surprisingly it appears that it won’t be easy to get rid of Russian energy altogether and it would certainly lead to a shock effect in the short run if energy trade with Russia came to a sudden standstill. It would lead to energy shortages, possibly requiring rationing of energy consumption for the industry, leading to a substantial drop in industrial production. Special thanks to our energy strategist, Ryan Fitzmaurice, for providing us with the much needed background on energy markets. Gas It is unlikely that Europe could replace Russian gas with alternative gas in the short run. The most obvious way to cope with a halt of Russian gas imports, would be to replace Russian gas with non-Russian gas imports. Yet as we have already explained in a recent research note, there probably isn’t enough available gas to, suddenly, replace Russian supply. Moreover, switching to different gas suppliers also faces technical constraints. Much of Europe’s gas is supplied through pipelines in Central- and Eastern-Europe from the east to the west, which are not suitable for sending gas the other way around -at least not on a short notice. It is also unlikely that LNG imports will fill the gap in the short run. Apart from a lack of availability -certainly in the short run-, some EU countries lack the infrastructure needed to import LNG. LNG needs to be converted to a gas state in LNG terminals before it can be transported through a network of pipelines. Germany, for example, does not have any LNG terminals and neither do landlocked countries such as Czech Republic. Were it to come to gas shortages, switching to alternative fuels, like coal, is potentially necessary to avoid an energy shortage in the winter. But it goes without saying that increasing coal consumption is not in line with Europe’s green ambitions. A full report on Europe’s gas dependency can be found here. Oil Replacing oil could be somewhat easier than replacing gas, although it would come at a higher cost. Even though some oil is transported via pipelines, it can also be transported via ship or railway, without the need to liquify it first (as is the case with gas). This means that, if Europe can get its hands on oil of a similar grade, Russian oil that is transported through pipelines in central and eastern Europe, could be replaced, albeit at a higher price. Europe would have to compete with countries that currently rely on those types of oil, potentially pushing those countries, such as India or China, to importing the (cheaper) oil from Russia. That is a big if however. Oil can differ strongly depending on its origin. Usually different oils are characterized by their sulphur content and density. Ural oil is a medium sour crude oil (figure 6). The closest replacement crudes are from Saudi Arabia, Iran and Oman. In addition, the medium sweet barrels from the North Sea, West Africa and the United states would also be suitable alternatives, with less need to desulfurize the crude (a process that is very natural gas intensive). Refineries are usually tailored to a specific kind of oil, but could switch their operations to accommodate other types of oil in a relatively short period of time, but testing and blending of the new crudes are required to ensure smooth operations. Solid fossil fuels Friday 8 April, the EU announced a ban on Russian solid fossil fuel imports from August. While this has induced the price for coal to increase and can hurt specific factories, in our view, the omittance of Russian coal won’t be a major problem on a macro scale. The EU also gets about one-third of its imported solid fossil fuels -mainly coal- from Russia. At first sight, this seems to imply the EU is rather dependent on Russia for this part of its energy consumption too. But the figure overstates the importance of Russian coal  imports for the EU. First, coal is not as important to most European countries as gas or oil. On average, solid fossil fuels -mostly coal- are good for 11% of total EU energy consumption (Figure 4). Second, while a couple of countries, especially in the eastern part of Europe, still rely on coal for a significant part of their energy consumption (Figure 9), most of these countries are either pretty self-reliant or mainly import their coal from countries other than Russia. Major consumer Poland for example, produces around 98% of its coal consumption domestically. Moreover, although clearly in contradiction with the green ambitions of the European Union, the EU could decide to produce more coal if push comes to shove. Halted EU production due risen energy prices As mentioned, gas and oil imports are not yet subject to outright sanctions in the EU. Yet energy prices have jumped (Figure 7) upon uncertainty over the future of Russian energy imports in the EU, a ban on Russian oil in the US, and a voluntary drop in purchases of especially Russian oil by European buyers, amongst other things -data on the coal price is from before the announcement of the ban on Russian coal imports. Despite a drop since their war-peak, energy prices are still higher than at the start of the year and just prior to the start of the war. These higher energy prices, in turn, have led to production cuts of energy intensive products in the EU such as aluminium, zinc, steel, ceramics, concrete, bricks, glass, asphalt, paper and fertilizers - especially large gas consumers had also already taken a hit from surging prices last year. This will not only hamper the production of these specific products, but also frustrate downstream production for which these goods serve as inputs. The disruptions will certainly hit the construction sector, a sector that was already dealing with lengthy delivery times for several inputs. Furthermore, higher input prices will likely hit margins of construction companies and project developers, raise consumer prices of construction projects, and lead to delays and cancelations of projects. Other sectors that will see the costs of their non-energy inputs rise are for example machinery and equipment, consumer  appliances, and transportation due to less steel and aluminium production. Meanwhile, less production of paper -or higher prices- will be felt across many sectors that need packaging material. And finally, lower fertilizer production in the EU adds to less supply from the warzone countries (see below), impacting especially the agricultural sector. EU dependence on chemicals, fertilizers and wood imports Apart from energy commodities, the EU quite extensively depends on the warzone for certain chemicals, fertilizers, certain types of wood, rubber and several types of metal. Chemicals include carbon (black) which is used, to strengthen rubber in tires for example, and ammonia which is mostly used to produce fertilizers. Combining the former with the EU’s dependence on Russia for the ‘end product’ rubber (12% import market share), there could be an impact on the car sector. That said, based on world market shares it should not be too difficult to shift to other suppliers if importers are ready to pay a somewhat higher price. Limited availability of fertilizers due to lower imports from the warzone and less production in the EU poses a challenge for agriculture and hence ultimately the food sector. Meanwhile, Russia is the world’s largest exporter of lumber and is an important supplier of different types of wood for the EU’s construction sector and fuel wood. Although we do not expect any shortages here, due to the wide availability of wood from other parts of Europe, we do expect higher prices. EU dependence on metal imports Table 1 also shows a large dependence on the warzone for different metals with in some cases limited diversification possibilities. Should the prices of products mentioned below rise, delivery times are likely to lengthen as it usually takes time to find alternative suppliers. In some cases actual shortages could arise -although it is difficult to get a grip on the timing thereof due to missing details on the size of stocks. Most vulnerable in this respect are sectors making use of iron and steel, nickel, palladium and aluminium: basic metals and fabricated metal products, machinery and equipment, transportation, computer and electronic products, and construction. Iron and steel To illustrate, more than 50% of EU imports of pig iron -used to make steel-, ferrous ore products, semi-finished iron and non-alloy steel products, and waste from iron and steel production comes from the warzone. Especially for pig iron and waste there are few alternatives as the warzone has a world export market share of respectively 63% and 52%. But also for the ferrous and semi-finished products diversification will be difficult, given the world market share of 30% and 40%. Fewer steel imports from the warzone adds to pressure in the market from less production in the EU itself due to the risen energy prices. Iron and steel have a broad range of destinations. They not only end up in the basic and fabricated metal industry, but also construction, production of machinery, equipment (that obviously includes ‘military’) and automotive. Nickel and aluminium Another important metal with availability at risk is nickel. Nickel is essential for rechargeable batteries, medical devices, automotive, and electrical and electronic equipment. It is also used in construction and to make stainless steel. The EU gets 90% of its nickel mattes’ imports from the warzone and 20% of its unwrought nickel. Russia is in the top three of global exporters of nickel -playing musical chairs with the US and Canada- and has a global export market share of 15%. Moreover, it’s a very tight market, especially due to nickel being required in rechargeable batteries, with ever growing demand due to the world’s push for electrification. Hence it is likely to be challenging -at best- to replace nickel imports from Russia and will for sure induce higher costs. With regards to aluminium, Russia is the steady number 2 exporter in the world, with a market share of 10%. Some 12% of EU imports of unwrought aluminium is sourced from Russia. Fewer aluminium imports from Russia adds to pressure in the market from less production in the EU itself due to the risen energy prices. Aluminium has a broad range of applications and is used for, for example, wires and cables in electrical equipment, in construction, transportation, machinery and equipment and electronic products, e.g. consumer appliances. Palladium and platinum The final metal we will highlight is the rare metal palladium. EU import dependence on Russia is 27%, with Russia having a world export market share of 23%. Palladium is a by-product of nickel and platinum mining, amongst others, and hence it is tough to ramp up production. In other words, the EU is both very dependent on Russia and it won’t be easy to get a grip on alternative supplies -at least not at favourable costs. Importantly, palladium is used as a catalytic converter in cars: in both gas engine cars to reduce the emission of polluting gasses and as a catalyst in hydrogen fuel cell vehicles. It is also used in multilayer ceramic capacitors and hard disks, which in turn can be found in laptops and phones for example. Other uses of palladium are in sensors, chips, surgical instruments and dentistry. For most applications there are alternatives such as platinum, although opinions on the quality of substitutes differ. Currently, the EU gets 9% of its platinum imports from Russia, and the latter’s world export market share is 7%. Yet, if palladium is being replaced by e.g. platinum, clearly the price of the latter would likely explode as well -unless the world’s largest platinum producer South Africa more or less doubles its platinum production. To sum it all up So, in short, the EU -and also the world- depends heavily on Russia, Ukraine and Belarus for several key inputs to its industrial sector. Among those commodities are gas, oil, iron and steel products, nickel, palladium, several chemicals and aluminium. Combined, the products in table 1 only account for some 1% of EU GDP. Yet their value alone does not give the full picture of their importance to lengthy industrial value chains -and food security as far as the agri-related commodities are concerned. Gas and oil are still flowing, but a sudden stop in Russian gas imports would clearly have significant ramifications for the entire industrial sector. Risen energy prices have already curtailed EU production of energy intensive products. Meanwhile, halted or limited inflows of the non-energy commodities certainly has an impact on the price of these products and lengthens delivery times, which will be felt by multiple industrial subsectors. Topping the list of most exposed sectors are basic metals and fabricated metal products. Thereafter we find construction, chemicals, coke and refined petroleum products, wood and paper, machinery and equipment, and transport equipment with more or less the same impact score. Whereas risen energy prices have a higher impact on some, commodity shortages and higher prices of non-energy goods are more problematic for others. Second order effects via non-EU countries Apart from vulnerabilities due to direct trade links between the EU and the warzone, the EU will likely also be impacted via trade with third countries. In this respect, vulnerable product groups are motorcycles, electronic circuits, batteries and electronics and electrical machines. To get a feeling for second order effects that run via non-EU countries, we adopt a two-step approach. First, we look at the product categories for which the European Union is not self-sufficient. Unfortunately, it is hard to find any consumption data on this level of detail, so we look at the average ratio of imports to exports over the last couple of years. Second, we filter the data to exclude product groups with a trading volume smaller than EUR 1bn. Third, we have excluded the goods that already popped up in the analysis of direct trade links between the EU27 and Russia, Belarus and Ukraine. The second step is to look at whether these products -are likely to- consist of inputs coming from the warzone and/or include inputs which have experienced large price rises due to the war. Due to the globally intertwined supply chains and data gaps in this respect we have to resort to proxies in some cases. We start by listing products for which the warzone countries have a significant world market share. The larger their combined market share, the larger the chance that producers depend on the warzone countries. And even if producers don’t rely on the warzone themselves, they are likely to be confronted with price increases if manufacturers in other countries start looking for alternatives for their inputs from the warzone. For products where the warzone countries have a combined world market share above 10%, we check whether these products are commonly used in the production process of the goods in table 2. We also have to take into account whether the dependency relies on goods and commodities from Russia or Ukraine. China, for example, has not yet joined the west in imposing sanctions on Russia, and thus for now Russian goods will continue to flow to China. For Ukraine it is different, however, given that production has (partially) come to a standstill. Some of the product groups listed in table 2 are vulnerable due to the current sanctions or the production fallout in the warzone. This mainly holds for motorcycles, electronic circuits, batteries and electronics and electrical machines. Motorcycles Motorcycles production is dependent on long, optimized supply chains and is therefore vulnerable to any disruption whatsoever. Moreover, most new motorcycles are packed with chips (see below) and other electronics (which were already in short supply before the war started!) and are built using steel, aluminium, plastics and rubber. Russia is a global player when it comes to steel and aluminium production, but China as well. Japan depends on imports when it comes to aluminium and articles thereof, yet has a major steel industry itself. Electronic circuits and diodes (Electronic) circuits and diodes are mostly made of purified silicon. Silicon is the second most abundant element on earth after oxygen, so silicon is not the constraint for circuits. The production process also requires an inert gas, for which neon, krypton and xenon gases are often used- in fact, these gases are said to be essential for the semiconductor manufacturing industry. With some 70% of world supply, Ukraine is the world’s largest producer of the required purified form of neon gas. It also supplies respectively 40% and 30% of global demand for krypton gas and xenon gas. Two major Ukrainian producers of purified neon gas in Odessa and Mariupol have already halted production. Meanwhile, Russia is a major player when it comes to the production of the crude version of neon gas, given that the latter is a by-product of the steel industry. China, with its large steel industry, is another major player in both the crude and refined production, although it would need to increase its activities to be able to fulfil domestic demand and it is uncertain at what pace it could expand production -China currently also imports neon gas from Ukraine. At the start of the invasion, stocks at major semiconductor manufacturers worldwide were estimated to be enough for some 6 months of chip production. Batteries Batteries are currently in high demand since they pay a vital role in the energy transition. Batteries are mostly made from steel and nickel. We have already touched upon the former above. Especially the latter could prove to be an issue. Nickel is currently in a really tight spot, given that Russia supplies roughly 18% of the worldwide nickel exports and high demand due to the world’s push for electric vehicles. Whilst buying nickel from Russia could be an issue for Japan, for now it is unlikely to be an issue for China, however. Other materials used in batteries, such as zinc, manganese, and graphite are mainly produced in China, whilst again others such as cobalt are produced in Congo, but are directly controlled by China. Electronics and electrical machines Electronics and electrical machines will likely be impacted indirectly through a crunch of the already tight market for electronic circuits. Additionally, some of the appliances make use of rechargeable batteries, which in turn are affected by shortages and/or higher prices in nickel markets. Other inputs for these type of products with tighter world supply are aluminium, palladium and steel. But, again, for the time being China -which is the EU’s major supplier of electronics and electrical machines-, need not to be harshly impacted as it is still refraining from sanctioning Russia and is one of the largest global aluminium and steel producers itself. To conclude, the EU might be confronted with lengthened delivery times or higher prices of some final goods imports from third countries, such as motorcycles and electrical machines. Yet also intermediate imports from third countries such as chips and batteries could become more difficult to get by. This, in turn, could hamper EU production of transport equipment, machinery, and electronic products and electrical equipment. Conclusion part I Even though the imports from Russia, Ukraine and Belarus only make up a small share of the total imports and exports of the European Union, it is clear that the war in Ukraine is wreaking havoc in supply chains. The most obvious impact is from higher energy prices, and maybe, if sanctions escalate, an outright energy shortage. Sanctions on gas imports are the most likely catalyst for such a crisis, whilst oil and coal imports are easier to replace. As we will show in the second part of this publication, Germany and Italy are worst suited to deal with such a crisis because of their relatively large industrial sector and heavy reliance on Russian energy, gas in particular. France and Spain on the other hand, are better equipped to deal with such a crisis, although it needs to be said that no country will be left unscathed. But it’s not just energy that is posing a serious threat to supply chains. As we have shown in the report, there are plenty of other materials and products, such as nickel, palladium, iron, wood and neon (and agri-commodities of course!), that threaten supply chain disruptions in some industries, especially in the short run as it takes time to find supply elsewhere. Some supply chains will be directly impacted through their dependence on Russia, Ukraine and Belarus, whilst others may be impacted indirectly, through second order effects. Part II: Which member state is the most vulnerable? In the second part of this publication, we compare the exposure of the five largest EU economies to distortions caused by the war. We find that the German economy is most exposed, followed by the Italian economy. Direct trade linkages between member states and the warzone Just looking at the macro picture for the EU27 might understate some of the problems in specific member states. Since, even if there is a surplus in timber in Poland for example, that doesn’t necessarily mean that that surplus can be exported to Spain easily if the infrastructure isn’t there. Additionally, it would be naïve to assume it can be done at a similar price and ease. As such it is useful to zoom in on member states to see for what goods they rely on the warzone the most. To compare member states we adopt a similar methodology as we did to create table 1 for the EU 27, but use z-scores to compare the relative vulnerability for the five biggest economies in the EU. Table 3 presents the relative vulnerabilities related to non-energy products for which at least one of the five large member states strongly depends on the warzone, via direct trade linkages. Given the importance of energy security we will dedicate a separate section to the reliance on Russian energy. The products in table 3 are ranked based on the combined z-scores of the member states for that product group. Semi-finished products of iron or non-alloy steel top the list, due to Italy’s strong links with the warzone in this respect. Maize, sunflower-seed and oil, and pig iron are other products that stand out. Out of the five largest member states, Italy seems most exposed to the war through direct trade linkages with the warzone. It relies heavily on the warzone for pig iron and semi-finished products of iron or non-alloy steel. Some 84% of its imports of the former come from the warzone and 77% of the latter. Italy also gets 82% of its ferrous products imports from the warzone, yet the (net) trade value of this category is substantially smaller. Finally, its dependence on warzone sunflower seeds and oil stands out. Spain is relatively dependent on the warzone for agri-commodities, like maize and sunflower seeds. Respectively, some 32% and 66% of Spain’s imports of these products comes from the warzone at relatively large net-volumes. It also substantially relies on the warzone for pig iron and ferrous products. The Netherlands is especially dependent on the warzone for ‘maize or corn’. Roughly half of Dutch maize/corn imports are from the warzone. This could severely impact the price and availability of animal fodder, as is evident from the fact that Dutch farmers have already begun to hoard animal fodder. For Germany, the biggest vulnerabilities (next to energy) are unwrought nickel and copper, metals that are vital to German industry. Roughly 45% of Germany’s nickel imports and 24% of its copper imports come from the warzone. France seems least vulnerable to the war-induced supply crunch. Yet it is exposed to a halt in oilcake imports; oilcake can be used as fodder and fertilizer. Energy dependence of member states on Russia In order to gauge the vulnerability of European countries to a potential collapse in Russian energy exports, we have gathered data on the consumption, trade and domestic production of oil, gas and solid fossil fuels. Based on this data, we can compute the share of energy consumption for which alternative sources would need to be found if imports of Russian energy come to a halt. Looking at figure 8 it is evident that especially countries in Eastern and Central Europe are set to lose in case of an energy boycott. These countries have been able to acquire Russian fossil fuels for attractive prices in the past decades, partially because of the large network of pipelines that run through Eastern and Central Europe. This has given them no incentive to diversify their energy mix or decrease the reliance on Russia. Yet also, Finland, Germany, Italy and Greece get more than 20% of their energy consumption out of Russia, while in the Netherlands it is only slightly less. Meanwhile, Scandinavian countries rely on Norway for gas and oil imports, whilst they simultaneously have relatively large shares of renewable energy; the Iberian Peninsula relies on Algeria for gas and France but also Belgium are relatively large producers and users of nuclear heat (Figure 9). As we have argued before in the section on Europe’s energy dependence, replacing all of these fossil fuels will not be easy. Replacing Russian oil and solid fossil fuels may be possible, albeit at a higher price, but replacing Russian gas will not be as easy. Simply supplying more LNG, if this is even possible, will not do the trick in the short run. Whilst some countries, such as Spain, the Netherlands and Italy, have the terminals to convert LNG to regular gas, landlocked countries such as Czechia, but also Germany do not. Currently, the infrastructure is lacking to transport freshly converted gas to those countries and hence those countries are even more vulnerable to a stop in Russian gas imports than others -which explains Germany’s most outspoken resistance to banning such imports. For the full report on Europe’s gas dependency, we refer to this publication. Importantly, this analysis is primarily focussed on the availability of energy, but even if we don’t get to the point where energy availability is an acute issue, high energy prices impact all countries, whether they are dependent on Russia or not. Especially member states with a large share of gas in their energy consumption such as Italy and the Netherlands have seen their energy bills rise substantially -already last year. Relatively large coal consumers also seem to have a cost disadvantage compared to those consuming more oil. If current prices would be sustained until the end of the year, gas, coal and oil bills would on average be about, 9, 4 and 1.7 times larger this year than in 2019, respectively. Compared to last year, bills would increase less, but still be 1.6 times larger in case of gas and oil and 2.5 times in case of coal. How about the sectoral composition? Next to the vulnerability related to certain key commodities and (intermediate) products, the economic impact of the war in Ukraine is also determined by the economic composition of a country. Basically every sector in an economy is impacted by the higher energy prices, but some are more than others3. Additionally, some sectors rely heavily on commodities that are currently in tight supply and are unable to transfer some of the higher commodity prices to consumer prices. Most service sectors are left relatively unscathed, whilst the industrial sector is feeling the pinch. Based on the energy intensity, exposure to commodities for which prices have risen, and exposure to commodities that are in short supply, we have ranked industrial subsectors from most to least likely to be impacted (Table 4). It needs to be said that while it is clear that basic metals and fabricated metal products rank at the top and textiles at the bottom, there is a broader ‘middle’ group with more or less the same impact score. In table 4 this group ranges from construction to electrical equipment. Whereas risen energy prices have a higher impact on some, commodity shortages and higher prices of non-energy goods are more problematic for others. If we combine the ranking with the relative size of the industrial subsector per country, we can compare the relative vulnerability for the industries of the five biggest Eurozone member states. Based on their composition, industries in Germany and the Netherlands seem most vulnerable, but the differences are small. The fact that Germany has a relatively large transport and machinery sector for example, is compensated for by the fact that the German food industry is relatively small. Conclusion part II The economic fallout of the Ukraine war is felt by the entire EU, with higher volatility in commodity markets, lengthened delivery times and higher prices for a range of commodities. Highly intertwined supply chains make it difficult to isolate the exact economic impact of the war on different member states, but we explored a method to grasp the relative vulnerabilities of the five largest EU member states. According to our analysis the German economy is most at risk to face headwinds caused by the war due to the composition and size of its industrial sector, and its dependence on Russian energy. Next in line is Italy. Italy’s industrial composition seems slightly more favorable, but it is relatively large as well. Furthermore, Italian industry extensively depends on Ukraine and Russia for certain industrial steel inputs and energy. Finally, Italy is a large gas consumer, and hence relatively more impacted by the increase in energy prices so far. Tyler Durden Thu, 04/14/2022 - 21:10.....»»

Why Did Vladimir Putin Invade Ukraine? Authored by Soeren Kern via The Gatestone Institute, Nearly three weeks have passed since Russian President Vladimir Putin began his invasion of Ukraine, but it still is not clear why he did so and what he hopes to achieve. Western analysts, commentators and government officials have put forward more than a dozen theories to explain Putin's actions, motives, and objectives. Some analysts posit that Putin is motivated by a desire to rebuild the Russian Empire. Others say he is obsessed with bringing Ukraine back into Russia's sphere of influence. Some believe that Putin wants to control Ukraine's vast offshore energy resources. Still others speculate that Putin, an aging autocrat, is seeking to maintain his grip on power. While some argue that Putin has a long-term proactive strategy aimed at establishing Russian primacy in Europe, others believe he is a short-term reactionary seeking to preserve what remains of Russia's diminishing position on the world stage. Following is a compilation of eight differing but complementary theories that try to explain why Putin invaded Ukraine. 1. Empire Building The most common explanation for Russia's invasion of Ukraine is that Putin, burning with resentment over the demise of the Soviet Empire, is determined to reestablish Russia (generally considered a regional power) as a great power that can exert influence on a global scale. According to this theory, Putin aims to regain control over the 14 post-Soviet states — often referred to as Russia's "near abroad" — that became independent after the collapse of the Soviet Union in 1991. This is part of greater plan to rebuild the Russian Empire, which territorially was even more expansive than the Soviet Empire. The Russian Empire theory holds that Putin's invasion of Georgia in 2008 and Crimea in 2014, as well as his 2015 decision to intervene militarily in Syria, were all parts of a strategy to restore Russia's geopolitical position — and erode the U.S.-led rules-based international order. Those who believe Putin is trying to reestablish Russia as a great power say that once he gains control over Ukraine, he will turn his focus to other former Soviet republics, including the Baltic countries of Estonia, Latvia, and Lithuania, and eventually Bulgaria, Romania and even Poland. Putin's ultimate objective, they say, is to drive the United States out of Europe, establish an exclusive great-power sphere of influence for Russia on the continent and dominate the European security order. Russian literature supports this view. In 1997, for instance, Russian strategist Aleksandr Dugin, a friend of Putin, published a highly influential book — "Foundation of Geopolitics: The Geopolitical Future of Russia" — which argued that Russia's long-term goal should be the creation, not of a Russian Empire, but of a Eurasian Empire. Dugin's book, which is required reading in Russian military academies, states that to make Russia great again, Georgia should be dismembered, Finland should be annexed and Ukraine should cease to exist: "Ukraine, as an independent state with certain territorial ambitions, represents an enormous danger for all of Eurasia." Dugin, who has been described as "Putin's Rasputin," added: "The Eurasian Empire will be constructed on the fundamental principle of the common enemy: the rejection of Atlanticism, the strategic control of the USA, and the refusal to allow liberal values to dominate us." In April 2005, Putin echoed this sentiment when, in his annual state of the nation address, he described the collapse of the Soviet empire as "the greatest geopolitical catastrophe of the 20th century." Since then, Putin has repeatedly criticized the U.S.-led world order, in which Russia has a subordinate position. In February 2007, during a speech to the Munich Conference on Security Policy, Putin attacked the idea of a "unipolar" world order in which the United States, as the sole superpower, was able to spread its liberal democratic values to other parts of the world, including Russia. In October 2014, in a speech to the Valdai Discussion Club, a high-profile Russian think tank close to the Kremlin, Putin criticized the post-World War II liberal international order, whose principles and norms — including adherence to the rule of law, respect for human rights and the promotion of liberal democracy, as well as preserving the sanctity of territorial sovereignty and existing boundaries — have regulated the conduct of international relations for nearly 80 years. Putin called for the creation of a new multipolar world order that is more friendly to the interests of an autocratic Russia. The late Zbigniew Brzezinski (former National Security Advisor to U.S. President Jimmy Carter), in his 1997 book "The Grand Chessboard," wrote that Ukraine is essential to Russian imperial ambitions: "Without Ukraine, Russia ceases to be a Eurasian empire.... However, if Moscow regains control over Ukraine, with its 52 million people and major resources as well as its access to the Black Sea, Russia automatically again regains the wherewithal to become a powerful imperial state, spanning Europe and Asia." The German historian Jan Behrends tweeted: "Make no mistake: For #Putin it's not about EU or NATO, it is about his mission to restore Russian empire. No more, no less. #Ukraine is just a stage, NATO is just one irritant. But the ultimate goal is Russian hegemony in Europe." Ukraine expert Peter Dickinson, writing for the Atlantic Council, noted: "Putin's extreme animosity towards Ukraine is shaped by his imperialistic instincts. It is often suggested that Putin wishes to recreate the Soviet Union, but this is actually far from the case. In fact, he is a Russian imperialist who dreams of a revived Czarist Empire and blames the early Soviet authorities for handing over ancestral Russian lands to Ukraine and other Soviet republics." Bulgarian scholar Ivan Krastev agreed: "America and Europe aren't divided on what Mr. Putin wants. For all the speculation about motives, that much is clear: The Kremlin wants a symbolic break from the 1990s, burying the post-Cold War order. That would take the form of a new European security architecture that recognizes Russia's sphere of influence in the post-Soviet space and rejects the universality of Western values. Rather than the restoration of the Soviet Union, the goal is the recovery of what Mr. Putin regards as historic Russia." Transatlantic security analyst Andrew Michta added that Putin's invasion of Ukraine was: "The culmination of almost two decades of policy aimed at reconstructing the Russian empire and bringing Russia back into European politics as one of the principal players empowered to shape the Continent's future." Writing for the national security blog 1945, Michta elaborated: "From Moscow's perspective the Ukrainian war is in effect the final battle of the Cold War — for Russia a time to reclaim its place on the European chessboard as a great empire, empowered to shape the Continent's destiny going forward. The West needs to understand and accept that only once Russia is unequivocally defeated in Ukraine will a genuine post-Cold War settlement finally be possible." 2. Buffer Zone Many analysts attribute the Russian invasion of Ukraine to geopolitics, which attempts to explain the behavior of states through the lens of geography. Most of the western part of Russia sits on the Russian Plain, a vast mountain-free area that extends over 4,000,000 square kilometers (1.5 million square miles). Also called the East European Plain, the vast flatland presents Russia with an acute security problem: an enemy army invading from central or eastern Europe would encounter few geographical obstacles to reach the Russian heartland. In other words, Russia, due to its geography, is especially difficult to defend. The veteran geopolitical analyst Robert Kaplan wrote that geography is the starting point for understanding everything else about Russia: "Russia remains illiberal and autocratic because, unlike Britain and America, it is not an island nation, but a vast continent with few geographical features to protect it from invasion. Putin's aggression stems ultimately from this fundamental geographical insecurity." Russia's leaders historically have sought to obtain strategic depth by pushing outward to create buffer zones — territorial barriers that increase the distance and time invaders would encounter to reach Moscow. The Russian Empire included the Baltics, Finland and Poland, all of which served as buffers. The Soviet Union created the Warsaw Pact — which included Albania, Bulgaria, Czechoslovakia, East Germany, Hungary, Poland and Romania — as a vast buffer to protect against potential invaders. Most of the former Warsaw Pact countries are now members of NATO. That leaves Belarus, Moldova and Ukraine, strategically located between Russia and the West, as the only eastern European countries left to serve as Russian buffer states. Some analysts argue that Russia's perceived need for a buffer is the primary factor in Putin's decision to invade Ukraine. Mark Galeotti, a leading British scholar of Russian power politics, noted that the possession of a buffer zone is intrinsic to Russia's understanding of great-power status: "From Putin's point of view, he has built so much of his political identity around the notion of making Russia a great power and making it recognized as a great power. When he thinks of great power, he is essentially a 19th century geopolitician. It's not the power of economic connectivity, or technological innovation, let alone soft power. No. Great power, in good old-fashioned terms, has a sphere of influence, countries whose sovereignty is subordinate to your own." Others believe that the concept of buffer states is obsolete. International security expert Benjamin Denison, for instance, argued that Russia cannot legitimately justify the need for a buffer zone: "Once nuclear weapons were invented ... buffer states were no longer seen as necessary regardless of geography, as nuclear deterrence worked to ensure the territorial integrity of great powers with nuclear capabilities.... The utility of buffer states and the concerns of geography invariably changed following the nuclear revolution. Without the concern of quick invasions into the homeland of a rival great power, buffer states lose their utility regardless of the geography of the territory.... "Narrowly defining national interests to geography, and mandating that geography pushes states to replicate past actions throughout history, only fosters inaccurate thinking and forgives Russian land-grabs as natural." 3. Ukrainian Independence Closely intertwined with theories about empire-building and geopolitics is Putin's obsession with extinguishing Ukrainian sovereignty. Putin contends that Ukraine has been part of Russia for centuries, and that its independence in August 1991 was a historical mistake. Ukraine, he claims, does not have a right to exist. Putin has repeatedly downplayed or negated Ukraine's right to statehood and sovereignty: In 2008, Putin told William Burns, then the U.S. ambassador to Russia (now director of the CIA): "Don't you know that Ukraine is not even a real country? Part of it is really East European and part is really Russian." In July 2021, Putin penned a 7,000-word essay — "On the Historical Unity of Russians and Ukrainians" — in which he expressed contempt for Ukrainian statehood, questioned the legitimacy of Ukraine's borders and argued that modern-day Ukraine occupies "the lands of historical Russia." He concluded: "I am confident that true sovereignty of Ukraine is possible only in partnership with Russia." In February 2022, just three days before he launched his invasion, Putin asserted that Ukraine was a fake state created by Vladimir Lenin, the founder of the Soviet Union: "Modern Ukraine was entirely created by Russia or, to be more precise, by Bolshevik, Communist Russia. This process started practically right after the 1917 revolution, and Lenin and his associates did it in a way that was extremely harsh on Russia — by separating, severing what is historically Russian land.... Soviet Ukraine is the result of the Bolsheviks' policy and can be rightfully called 'Vladimir Lenin's Ukraine.' He was its creator and architect." Russia scholar Mark Katz, in an essay — "Blame It on Lenin: What Putin Gets Wrong About Ukraine" — argued that Putin should draw lessons from Lenin's realization that a more accommodating approach toward Ukrainian nationalism would better serve Russia's long-term interests: "Putin cannot escape the problem that Lenin himself had to deal with of how to reconcile non-Russians to being ruled by Russia. The forceful imposition of Russian rule in part — much less all — of Ukraine will not bring about such a reconciliation. For even if Ukrainians cannot resist the forceful imposition of Russian rule over part or all of Ukraine now, Putin's success in imposing it is only likely to intensify feelings of Ukrainian nationalism and lead it to burst forth again whenever the opportunity arises." Ukraine's political independence has been accompanied by a long-running feud with Russia over religious allegiance. In January 2019, in what was described as "the biggest rift in Christianity in centuries," the Orthodox church in Ukraine gained independence (autocephaly) from the Russian church. The Ukrainian church had been under the jurisdiction of the Moscow patriarchate since 1686. Its autonomy dealt a blow to the Russian church, which lost around one-fifth of the 150 million Orthodox Christians under its authority. The Ukrainian government claimed that Moscow-backed churches in Ukraine were being used by the Kremlin to spread propaganda and to support Russian separatists in the eastern Donbas region. Putin wants the Ukrainian church to return to Moscow's orbit, and has warned of "a heavy dispute, if not bloodshed" over any attempts to transfer ownership of church property. The head of the Russian Orthodox Church, Patriarch Kirill of Moscow, has declared that Kyiv, where the Orthodox religion began, is comparable in terms of its historic importance to Jerusalem: "Ukraine is not on the periphery of our church. We call Kiev 'the mother of all Russian cities'. For us Kiev is what Jerusalem is for many. Russian Orthodoxy began there, so under no circumstances can we abandon this historical and spiritual relationship. The whole unity of our Local Church is based on these spiritual ties." On March 6, Kirill — a former KGB agent who is known as "Putin's altar boy" due to his subservience to the Russian leader — publicly endorsed the invasion of Ukraine. In a sermon he repeated Putin's claims that the Ukrainian government was carrying out a "genocide" of Russians in Ukraine: "For eight years, the suppression, extermination of people has been underway in Donbass. Eight years of suffering and the entire world is silent." German geopolitical analyst Ulrich Speck wrote: "For Putin, destroying Ukraine's independence has become an obsession.... Putin has often said, and even written, that Ukraine is not a separate nation, and should not exist as a sovereign state. It is this fundamental denial that has led Putin to wage this totally senseless war that he cannot win. And that leads us to the problem of making peace: either Ukraine has the right to exist as a nation and a sovereign state, or it hasn't. Sovereignty is indivisible. Putin denies it, Ukraine defends it. How can you make a compromise about the existence of Ukraine as a sovereign state? Impossible. That's why both sides can only fight on until they win. "Normally wars that take place between states are about conflicts they have between them. Yet this is a war about the existence of one state, which is denied by the aggressor. That's why the usual concepts of peacemaking — finding a compromise — do not apply. If Ukraine continues to exist as a sovereign state, Putin will have lost. He is not interested in territorial gain as such — it's rather a burden for him. He is only interested in controlling the entire country. Everything else for him is defeat." Ukraine expert Taras Kuzio added: "The real cause of today's crisis is Putin's quest to return Ukraine to the Russian orbit. For the past eight years, he has used a combination of direct military intervention, cyber-attacks, disinformation campaigns, economic pressure, and coercive diplomacy to try and force Ukraine into abandoning its Euro-Atlantic ambitions.... "Putin's ultimate objective is Ukraine's capitulation and the country's absorption into the Russian sphere of influence. His obsessive pursuit of this goal has already plunged the world into a new Cold War.... "Nothing less than Ukraine's return to the Kremlin orbit will satisfy Putin or assuage his fears over the further breakup of Russia's imperial inheritance. He will not stop until he is stopped. In order to achieve this, the West must become far more robust in responding to Russian imperial aggression, while also expediting Ukraine's own Euro-Atlantic integration." 4. NATO This theory holds that Putin invaded Ukraine to prevent it from joining NATO. The Russian president has repeatedly demanded that the West "immediately" guarantee that Ukraine will not be allowed to join NATO or the European Union. A vocal proponent of this viewpoint is the American international relations theorist John Mearsheimer, who, in a controversial essay, "Why the Ukraine Crisis Is the West's Fault," argued that the eastward expansion of NATO provoked Putin to act militarily against Ukraine: "The United States and its European allies share most of the responsibility for the crisis. The taproot of the trouble is NATO enlargement, the central element of a larger strategy to move Ukraine out of Russia's orbit and integrate it into the West.... "Since the mid-1990s, Russian leaders have adamantly opposed NATO enlargement, and in recent years, they have made it clear that they would not stand by while their strategically important neighbor turned into a Western bastion." In a recent interview with The New Yorker, Mearsheimer blamed the United States and its European allies for the current conflict: "I think all the trouble in this case really started in April 2008, at the NATO Summit in Bucharest, where afterward NATO issued a statement that said Ukraine and Georgia would become part of NATO." In fact, Putin has not always opposed NATO expansion. Several times he went so far as to say that the eastward expansion of NATO was none of Russia's concern. In March 2000, for instance, Putin, in an interview with the late BBC television presenter David Frost, was asked whether he viewed NATO as a potential partner, rival or enemy. Putin responded: "Russia is part of the European culture. And I cannot imagine my own country in isolation from Europe and what we often call the civilized world. So, it is hard for me to visualize NATO as an enemy." In November 2001, in an interview with National Public Radio, Putin was asked if he opposed the admission of the three Baltic states — Lithuania, Latvia and Estonia — into NATO. He replied: "We of course are not in a position to tell people what to do. We cannot forbid people to make certain choices if they want to increase the security of their nations in a particular way." In May 2002, Putin, when asked about the future of relations between NATO and Ukraine, said matter-of-factly that he did not care one way or the other: "I am absolutely convinced that Ukraine will not shy away from the processes of expanding interaction with NATO and the Western allies as a whole. Ukraine has its own relations with NATO; there is the Ukraine-NATO Council. At the end of the day the decision is to be taken by NATO and Ukraine. It is a matter for those two partners." Putin's position on NATO expansion radically changed after the 2004 Orange Revolution, which was triggered by Moscow's attempt to steal Ukraine's presidential election. A massive pro-democracy uprising ultimately led to the defeat of Putin's preferred candidate, Viktor Yanukovych, who eventually did become president of Ukraine in 2010 but was ousted in the 2014 Euromaidan Revolution. Former NATO Secretary-General Anders Fogh Rasmussen, in a recent interview with Radio Free Europe, discussed how Putin's views about NATO have changed: "Mr. Putin has changed over the years. My first meeting took place in 2002...and he was very positive regarding cooperation between Russia and the West. Then, gradually, he changed his mind. And from around 2005 to 2006, he got increasingly negative toward the West. And in 2008, he attacked Georgia.... In 2014, he took Crimea, and now we have seen a full-scale invasion of Ukraine. So, he has really changed over the years. "I think the revolutions in Georgia and Ukraine in 2004 and 2005 contributed to his change of mind. We shouldn't forget that Vladimir Putin grew up in the KGB. So, his thinking is very much impacted by that past. I think he suffers from paranoia. And he thought that after color revolutions in Georgia and Ukraine, that the aim [of the West] was to initiate a regime change in the Kremlin — in Moscow — as well. And that's why he turned against the West. "I put the blame entirely on Putin and Russia. Russia is not a victim. We have reached out to Russia several times during history.... First, we approved the NATO Russia Founding Act in 1997.... Next time, it was in 2002, we reached out once again, established something very special, namely the NATO-Russia Council. And in 2010, we decided at a NATO-Russia summit that we would develop a strategic partnership between Russia and NATO. So, time and again, we reached out to Russia. "I think we should have done more to deter Putin. Back in 2008, he attacked Georgia, took de facto Abkhazia and South Ossetia. We could have reacted much more determinedly already in that time." In recent years, Putin repeatedly has claimed that the post-Cold War enlargement of NATO poses a threat to Russia, which has been left with no other choice than to defend itself. He also has accused the West of trying to encircle Russia. In fact, of the 14 countries that have borders with Russia, only five are NATO members. The borders of those five countries — Estonia, Latvia, Lithuania, Norway and Poland — are contiguous with only 5% of Russia's total borders. Putin has claimed that NATO broke solemn promises it made in the 1990s that the alliance would not expand to the east. "You promised us in the 1990s that NATO would not move an inch to the east. You brazenly cheated us," he said in during a press conference in December 2021. Mikhail Gorbachev, then president of the Soviet Union, countered that such promises were never made. Putin recently issued three wildly unrealistic demands: NATO must withdraw its forces to its 1997 borders; NATO must not offer membership to other countries, including Finland, Sweden, Moldova or Georgia; NATO must provide written guarantees that Ukraine will never join the alliance. Writing for Foreign Affairs, Russian historian Dmitri Trenin, in an essay — "What Putin Really Wants in Ukraine" — argued that Putin wants stop NATO expansion, not to annex more territory: "Putin's actions suggest that his true goal is not to conquer Ukraine and absorb it into Russia but to change the post-Cold War setup in Europe's east. That setup left Russia as a rule-taker without much say in European security, which was centered on NATO. If he manages to keep NATO out of Ukraine, Georgia, and Moldova, and U.S. intermediate-range missiles out of Europe, he thinks he could repair part of the damage Russia's security sustained after the Cold War ended. Not coincidentally, that could serve as a useful record to run on in 2024, when Putin would be up for re-election." 5. Democracy This theory holds that Ukraine, a flourishing democracy, poses an existential threat to Putin's autocratic model of governance. The continued existence of a Western-aligned, sovereign, free and democratic Ukraine could inspire the Russian people to demand the same. Former U.S. Ambassador to Russia Michael McFaul and Robert Person, a professor at the United States Military Academy, wrote that Putin is terrified of democracy in Ukraine: "Over the last thirty years, the salience of the issue [NATO expansion] has risen and fallen not primarily because of the waves of NATO expansion, but due instead to waves of democratic expansion in Eurasia. In a very clear pattern, Moscow's complaints about NATO spike after democratic breakthroughs.... "Because the primary threat to Putin and his autocratic regime is democracy, not NATO, that perceived threat would not magically disappear with a moratorium on NATO expansion. Putin would not stop seeking to undermine democracy and sovereignty in Ukraine, Georgia, or the region as a whole if NATO stopped expanding. As long as citizens in free countries exercise their democratic rights to elect their own leaders and set their own course in domestic and foreign politics, Putin will keep them in his crosshairs.... "The more serious cause of tensions has been a series of democratic breakthroughs and popular protests for freedom throughout the 2000s, what many refer to as the "Color Revolutions." Putin believes that Russian national interests have been threatened by what he portrays as U.S.-supported coups. After each of them — Serbia in 2000, Georgia in 2003, Ukraine in 2004, the Arab Spring in 2011, Russia in 2011-12, and Ukraine in 2013-14 — Putin has pivoted to more hostile policies toward the United States, and then invoked the NATO threat as justification for doing so.... "Ukrainians who rose up in defense of their freedom were, in Putin's own assessment, Slavic brethren with close historical, religious, and cultural ties to Russia. If it could happen in Kyiv, why not in Moscow?" Ukraine expert Taras Kuzio agrees: "Putin remains haunted by the wave of pro-democracy uprisings that swept Eastern Europe in the late 1980s, setting the stage for the subsequent Soviet collapse. He sees Ukraine's fledgling democracy as a direct challenge to his own authoritarian regime and recognizes that Ukraine's historical closeness to Russia makes this threat particularly acute." 6. Energy Ukraine holds the second-biggest known reserves — more than one trillion cubic meters — of natural gas in Europe after Russia. These reserves, under the Black Sea, are concentrated around the Crimean Peninsula. In addition, large deposits of shale gas have been discovered in eastern Ukraine, around Kharkiv and Donetsk. In January 2013, Ukraine signed a 50-year, $10 billion deal with Royal Dutch Shell to explore and drill for natural gas in eastern Ukraine. Later that year, Kyiv signed a 50-year, $10 billion shale gas production-sharing agreement with the American energy company Chevron. Shell and Chevron pulled out of those deals after Russia annexed the Crimean Peninsula. Some analysts believe Putin annexed Crimea to prevent Ukraine from becoming a major oil and gas provider to Europe and thereby challenge Russia's energy supremacy. Russia, they argue, was also worried that as Europe's second-largest petrostate, Ukraine would have been granted fast-track membership to the EU and NATO. According to this theory, Russia's invasion of Ukraine is aimed at forcing Kyiv to officially acknowledge Crimea as Russian, and recognize the separatist republics of Donetsk and Lugansk as independent states, so that Moscow can legally secure control over the natural resources in these areas. 7. Water On February 24, the first day of the Russian invasion of Ukraine, Russian troops restored water flow to a strategically important canal linking the Dnieper River to Russian-controlled Crimea. Ukraine blocked the Soviet-era North Crimean Canal, which supplies 85% of Crimea's water needs, after Russia annexed the peninsula in 2014. The water shortages resulted in a massive reduction in agricultural production on the peninsula and forced Russia to spend billions of rubles each year to supply water from the mainland to sustain the Crimean population. The water crisis was a major source of tension between Ukraine and Russia. Ukrainian President Volodymyr Zelensky insisted that the water supply would not be restored until Russia returns the Crimean Peninsula. Security analyst Polina Vynogradova noted that any resumption of water supply would have amounted to a de facto recognition of Russian authority in Crimea and would have undermined Ukraine's claim to the peninsula. It would also have weakened Ukrainian leverage over negotiations on Donbas. Even if Russian troops eventually withdraw from Ukraine, Russia likely will maintain permanent control over the entire 400-kilometer North Crimean Canal to ensure there are no more disruptions to Crimea's water supply. 8. Regime Survival This theory holds that the 69-year-old Putin, who has been in power since 2000, seeks perpetual military conflict as a way of remaining popular with the Russian public. Some analysts believe that after public uprisings in Belarus and Kazakhstan, Putin decided to invade Ukraine due to a fear of losing his grip on power. In an interview with Politico, Bill Browder, the American businessman who heads up the Global Magnitsky Justice Campaign, said that Putin feels the need to look strong at all times: "I don't think that this war is about NATO; I don't think this war is about Ukrainian people or the EU or even about Ukraine; this war is about starting a war in order to stay in power. Putin is a dictator, and he's a dictator whose intention is to stay in power until the end of his natural life. He said to himself that the writing's on the wall for him unless he does something dramatic. Putin is just thinking short-term ... 'how do I stay in power from this week to the next? And then next week to the next?'" Anders Åslund, a leading specialist on economic policy in Russia and Ukraine, agreed: "How to understand Putin's war in Ukraine. It is not about NATO, EU, USSR or even Ukraine. Putin needs a war to justify his rule & his swiftly increasing domestic repression.... It is really all about Putin, not about neo-imperialism, Russian nationalism or even the KGB." Russia expert Anna Borshchevskaya wrote that the invasion of Ukraine could be the beginning of the end for Putin: "Though he is not democratically elected, he worries about public opinion and protests at home, seeing them as threats to retaining his grip on power.... While Putin may have hoped that invading Ukraine would quickly expand Russian territory and help restore the grandeur of the former Russian empire, it could do the opposite." Tyler Durden Tue, 03/15/2022 - 02:00.....»»

In Memory Of JFK: The First US President To Be Labeled A Terrorist & Threat To National Security Authored by Cynthia Chung via The Saker blog, In April 1954, Kennedy stood up on the Senate floor to challenge the Eisenhower Administration’s support for the doomed French imperial war in Vietnam, foreseeing that this would not be a short-lived war. In July 1957, Kennedy once more took a strong stand against French colonialism, this time France’s bloody war against Algeria’s independence movement, which again found the Eisenhower Administration on the wrong side of history. Rising on the Senate floor, two days before America’s own Independence Day, Kennedy declared: “The most powerful single force in the world today is neither communism nor capitalism, neither the H-bomb nor the guided missile – it is man’s eternal desire to be free and independent. The great enemy of that tremendous force of freedom is called, for want of a more precise term, imperialism – and today that means Soviet imperialism and, whether we like it or not, and though they are not to be equated, Western imperialism. Thus, the single most important test of American foreign policy today is how we meet the challenge of imperialism, what we do to further man’s desire to be free. On this test more than any other, this nation shall be critically judged by the uncommitted millions in Asia and Africa, and anxiously watched by the still hopeful lovers of freedom behind the Iron Curtain. If we fail to meet the challenge of either Soviet or Western imperialism, then no amount of foreign aid, no aggrandizement of armaments, no new pacts or doctrines or high-level conferences can prevent further setbacks to our course and to our security.” In September 1960, the annual United Nations General Assembly was held in New York. Fidel Castro and a fifty-member delegation were among the attendees and had made a splash in the headlines when he decided to stay at the Hotel Theresa in Harlem after the midtown Shelburne Hotel demanded a $20,000 security deposit. He made an even bigger splash in the headlines when he made a speech at this hotel, discussing the issue of equality in the United States while in Harlem, one of the poorest boroughs in the country. Kennedy would visit this very same hotel a short while later, and also made a speech: “Behind the fact of Castro coming to this hotel, [and] Khrushchev…there is another great traveler in the world, and that is the travel of a world revolution, a world in turmoil…We should be glad [that Castro and Khrushchev] came to the United States. We should not fear the twentieth century, for the worldwide revolution which we see all around us is part of the original American Revolution." What did Kennedy mean by this? The American Revolution was fought for freedom, freedom from the rule of monarchy and imperialism in favour of national sovereignty. What Kennedy was stating, was that this was the very oppression that the rest of the world wished to shake the yoke off, and that the United States had an opportunity to be a leader in the cause for the independence of all nations. On June 30th, 1960, marking the independence of the Republic of Congo from the colonial rule of Belgium, Patrice Lumumba, the first Congolese Prime Minister gave a speech that has become famous for its outspoken criticism of colonialism. Lumumba spoke of his people’s struggle against “the humiliating bondage that was forced upon us… [years that were] filled with tears, fire and blood,” and concluded vowing “We shall show the world what the black man can do when working in liberty, and we shall make the Congo the pride of Africa.” Shortly after, Lumumba also made clear, “We want no part of the Cold War… We want Africa to remain African with a policy of neutralism." As a result, Lumumba was labeled a communist for his refusal to be a Cold War satellite for the western sphere. Rather, Lumumba was part of the Pan-African movement that was led by Ghanaian President Kwame Nkrumah (who later Kennedy would also work with), which sought national sovereignty and an end to colonialism in Africa. Lumumba “would remain a grave danger,” Dulles said at an NSC meeting on September 21, 1960, “as long as he was not yet disposed of.” Three days later, Dulles made it clear that he wanted Lumumba permanently removed, cabling the CIA’s Leopoldville station, “We wish give [sic] every possible support in eliminating Lumumba from any possibility resuming governmental position.” Lumumba was assassinated on Jan. 17th, 1961, just three days before Kennedy’s inauguration, during the fog of the transition period between presidents, when the CIA is most free to tie its loose ends, confident that they will not be reprimanded by a new administration that wants to avoid scandal on its first days in office. Kennedy, who clearly meant to put a stop to the Murder Inc. that Dulles had created and was running, would declare to the world in his inaugural address on Jan. 20th, 1961, “The torch has been passed to a new generation of Americans.” La Resistance Along with inheriting the responsibility of the welfare of the country and its people, Kennedy was to also inherit a secret war with communist Cuba run by the CIA. The Bay of Pigs set-up would occur three months later. Prouty compares the Bay of Pigs incident to that of the Crusade for Peace; the Bay of Pigs being orchestrated by the CIA, and the Crusade for Peace sabotaged by the CIA, in both cases to ruin the U.S. president’s (Eisenhower and Kennedy) ability to form a peaceful dialogue with Khrushchev and decrease Cold War tensions. Both presidents’ took onus for the events respectively, despite the responsibility resting with the CIA. However, Eisenhower and Kennedy understood, if they did not take onus, it would be a public declaration that they did not have any control over their government agencies and military. Further, the Bay of Pigs operation was in fact meant to fail. It was meant to stir up a public outcry for a direct military invasion of Cuba. On public record is a meeting (or more aptly described as an intervention) with CIA Deputy Director for Plans Richard Bissell, Joint Chiefs Chairman Lyman Lemnitzer, and Navy Chief Admiral Burke basically trying to strong-arm President Kennedy into approving a direct military attack on Cuba. Admiral Burke had already taken the liberty of positioning two battalions of Marines on Navy destroyers off the coast of Cuba “anticipating that U.S. forces might be ordered into Cuba to salvage a botched invasion.”[7] (This incident is what inspired the Frankenheimer movie “Seven Days in May.”) Kennedy stood his ground. “They were sure I’d give in to them,” Kennedy later told Special Assistant to the President Dave Powers. “They couldn’t believe that a new president like me wouldn’t panic and try to save his own face. Well they had me figured all wrong.” Incredibly, not only did the young president stand his ground against the Washington war hawks just three months into his presidential term, but he also launched the Cuba Study Group which found the CIA to be responsible for the fiasco, leading to the humiliating forced resignation of Allen Dulles, Richard Bissell and Charles Cabell. (For more on this refer to my report.) Unfortunately, it would not be that easy to dethrone Dulles, who continued to act as head of the CIA, and key members of the intelligence community such as Helms and Angleton regularly bypassed McCone (the new CIA Director) and briefed Dulles directly. But Kennedy was also serious about seeing it through all the way, and vowed to “splinter the CIA into a thousand pieces and scatter it to the winds.” * * * There is another rather significant incident that had occurred just days after the Bay of Pigs, and which has largely been overshadowed by the Cuban fiasco in the United States. From April 21-26th, 1961, the Algiers putsch or Generals’ putsch, was a failed coup d’état intended to force President de Gaulle (1959-1969) not to abandon the colonial French Algeria. The organisers of the putsch were opposed to the secret negotiations that French Prime Minister Michel Debré had started with the anti-colonial National Liberation Front (FLN). On January 26th, 1961, just three months before the attempted coup d’état, Dulles sent a report to Kennedy on the French situation that seemed to be hinting that de Gaulle would no longer be around, “A pre-revolutionary atmosphere reigns in France… The Army and the Air Force are staunchly opposed to de Gaulle…At least 80 percent of the officers are violently against him. They haven’t forgotten that in 1958, he had given his word of honor that he would never abandon Algeria. He is now reneging on his promise, and they hate him for that. de Gaulle surely won’t last if he tries to let go of Algeria. Everything will probably be over for him by the end of the year—he will be either deposed or assassinated.” The attempted coup was led by Maurice Challe, whom de Gaulle had reason to conclude was working with the support of U.S. intelligence, and Élysée officials began spreading this word to the press, which reported the CIA as a “reactionary state-within-a-state” that operated outside of Kennedy’s control. Shortly before Challe’s resignation from the French military, he had served as NATO commander in chief and had developed close relations with a number of high-ranking U.S. officers stationed in the military alliance’s Fontainebleau headquarters. In August 1962 the OAS (Secret Army Organization) made an assassination attempt against de Gaulle, believing he had betrayed France by giving up Algeria to Algerian nationalists. This would be the most notorious assassination attempt on de Gaulle (who would remarkably survive over thirty assassination attempts while President of France) when a dozen OAS snipers opened fire on the president’s car, which managed to escape the ambush despite all four tires being shot out. After the failed coup d’état, de Gaulle launched a purge of his security forces and ousted General Paul Grossin, the chief of SDECE (the French secret service). Grossin was closely aligned with the CIA, and had told Frank Wisner over lunch that the return of de Gaulle to power was equivalent to the Communists taking over in Paris. In 1967, after a five-year enquête by the French Intelligence Bureau, it released its findings concerning the 1962 assassination attempt on de Gaulle. The report found that the 1962 assassination plot could be traced back to the NATO Brussels headquarters, and the remnants of the old Nazi intelligence apparatus. The report also found that Permindex had transferred $200,000 into an OAS bank account to finance the project. As a result of the de Gaulle exposé, Permindex was forced to shut down its public operations in Western Europe and relocated its headquarters from Bern, Switzerland to Johannesburg, South Africa, it also had/has a base in Montreal, Canada where its founder Maj. Gen. Louis M. Bloomfield (former OSS) proudly had his name amongst its board members until the damning de Gaulle report. The relevance of this to Kennedy will be discussed shortly. As a result of the SDECE’s ongoing investigation, de Gaulle made a vehement denunciation of the Anglo-American violation of the Atlantic Charter, followed by France’s withdrawal from the NATO military command in 1966. France would not return to NATO until April 2009 at the Strasbourg-Kehl Summit. In addition to all of this, on Jan. 14th, 1963, de Gaulle declared at a press conference that he had vetoed British entry into the Common Market. This would be the first move towards France and West Germany’s formation of the European Monetary System, which excluded Great Britain, likely due to its imperialist tendencies and its infamous sin City of London. Former Secretary of State Dean Acheson telegrammed West German Chancellor Konrad Adenauer directly, appealing to him to try to persuade de Gaulle to back track on the veto, stating “if anyone can affect Gen. de Gaulle’s decision, you are surely that person.” Little did Acheson know that Adenauer was just days away from signing the Franco-German Treaty of Jan 22nd, 1963 (also known as the ÉlyséeTreaty), which had enormous implications. Franco-German relations, which had long been dominated by centuries of rivalry, had now agreed that their fates were aligned. (This close relationship was continued to a climactic point in the late 1970s, with the formation of the European Monetary System, and France and West Germany’s willingness in 1977 to work with OPEC countries trading oil for nuclear technology, which was sabotaged by the U.S.-Britain alliance. The Élysée Treaty was a clear denunciation of the Anglo-American forceful overseeing that had overtaken Western Europe since the end of WWII. On June 28th, 1961, Kennedy wrote NSAM #55. This document changed the responsibility of defense during the Cold War from the CIA to the Joint Chiefs of Staff and would have (if seen through) drastically changed the course of the war in Vietnam. It would also have effectively removed the CIA from Cold War military operations and limited the CIA to its sole lawful responsibility, the collecting and coordination of intelligence. By Oct 11th, 1963, NSAM #263, closely overseen by Kennedy[14], was released and outlined a policy decision “to withdraw 1,000 military personnel [from Vietnam] by the end of 1963” and further stated that “It should be possible to withdraw the bulk of U.S. personnel by 1965.” The Armed Forces newspaper Stars and Stripes had the headline U.S. TROOPS SEEN OUT OF VIET BY ’65. It would be the final nail in the coffin. Treason in America “Treason doth never prosper; what is the reason? Why, if it prosper, none dare call it treason.” – Sir John Harrington By Germany supporting de Gaulle’s exposure of the international assassination ring, his adamant opposition to western imperialism and the role of NATO, and with a young Kennedy building his own resistance against the imperialist war of Vietnam, it was clear that the power elite were in big trouble. On November 22nd, 1963 President Kennedy was brutally murdered in the streets of Dallas, Texas in broad daylight. With the assassination of Ngo Dinh Diem, likely ordained by the CIA, on Nov. 2nd, 1963 and Kennedy just a few weeks later, de facto President Johnson signed NSAM #273 on Nov. 26th, 1963 to begin the reversal of Kennedy’s policy under #263. And on March 17th, 1964, Johnson signed NSAM #288 that marked the full escalation of the Vietnam War and involved 2,709,918 Americans directly serving in Vietnam, with 9,087,000 serving with the U.S. Armed Forces during this period. The Vietnam War would continue for another 12 years after Kennedy’s death, lasting a total of 20 years for Americans, and 30 years if you count American covert action in Vietnam. Two days before Kennedy’s assassination, a hate-Kennedy handbill was circulated in Dallas accusing the president of treasonous activities including being a communist sympathizer. On November 29th, 1963 the Warren Commission was set up to investigate the murder of President Kennedy. The old Congressman Hale Boggs of Louisiana was a member of that Warren Commission. Boggs became increasingly disturbed by the lack of transparency and rigour exhibited by the Commission and became convinced that many of the documents used to incriminate Oswald were in fact forgeries. In 1965 Rep. Boggs told New Orleans District Attorney Jim Garrison that Oswald could not have been the one who killed Kennedy. It was Boggs who encouraged Garrison to begin the only law enforcement prosecution of the President’s murder to this day. Nixon was inaugurated as President of the United States on Jan 20th, 1969. Hale Boggs soon after called on Nixon’s Attorney General John Mitchell to have the courage to fire J. Edgar Hoover. It wasn’t long thereafter that the private airplane carrying Hale Boggs disappeared without a trace. Jim Garrison was the District Attorney of New Orleans from 1962 to 1973 and was the only one to bring forth a trial concerning the assassination of President Kennedy. In Jim Garrison’s book “On the Trail of the Assassins”, J. Edgar Hoover comes up several times impeding or shutting down investigations into JFK’s murder, in particular concerning the evidence collected by the Dallas Police Department, such as the nitrate test Oswald was given and which exonerated him, proving that he never shot a rifle the day of Nov 22nd, 1963. However, for reasons only known to the government and its investigators this fact was kept secret for 10 months. It was finally revealed in the Warren Commission report, which inexplicably didn’t change their opinion that Oswald had shot Kennedy. Another particularly damning incident was concerning the Zapruder film that was in the possession of the FBI and which they had sent a “copy” to the Warren Commission for their investigation. This film was one of the leading pieces of evidence used to support the “magic bullet theory” and showcase the direction of the headshot coming from behind, thus verifying that Oswald’s location was adequate for such a shot. During Garrison’s trial on the Kennedy assassination (1967-1969) he subpoenaed the Zapruder film that for some peculiar reason had been locked up in some vault owned by Life magazine (the reader should note that Henry Luce the owner of Life magazine was in a very close relationship with the CIA). This was the first time in more than five years that the Zapruder film was made public. It turns out the FBI’s copy that was sent to the Warren Commission had two critical frames reversed to create a false impression that the rifle shot was from behind. When Garrison got a hold of the original film it was discovered that the head shot had actually come from the front. In fact, what the whole film showed was that the President had been shot from multiple angles meaning there was more than one gunman. When the FBI was questioned about how these two critical frames could have been reversed, they answered self-satisfactorily that it must have been a technical glitch… There is also the matter of the original autopsy papers being destroyed by the chief autopsy physician, James Humes, to which he even testified to during the Warren Commission, apparently nobody bothered to ask why… This would explain why the Assassination Records Review Board (ARRB), reported in a July 1998 staff report their concern for the number of shortcomings in the original autopsy, that “One of the many tragedies of the assassination of President Kennedy has been the incompleteness of the autopsy record and the suspicion caused by the shroud of secrecy that has surrounded the records that do exist.” [emphasis added] The staff report for the Assassinations Records Review Board contended that brain photographs in the Kennedy records are not of Kennedy’s brain and show much less damage than Kennedy sustained. There is a lot of spurious effort to try to ridicule anyone who challenges the Warren Commission’s official report as nothing but fringe conspiracy theory. And that we should not find it highly suspect that Allen Dulles, of all people, was a member and pretty much leader of said commission. The reader should keep in mind that much of this frothing opposition stems from the very agency that perpetrated crime after crime on the American people, as well as abroad. When has the CIA ever admitted guilt, unless caught red-handed? Even after the Church committee hearings, when the CIA was found guilty of planning out foreign assassinations, they claimed that they had failed in every single plot or that someone had beaten them to the punch, including in the case of Lumumba. The American people need to realise that the CIA is not a respectable agency; we are not dealing with honorable men. It is a rogue force that believes that the ends justify the means, that they are the hands of the king so to speak, above government and above law. Those at the top such as Allen Dulles were just as adamant as Churchill about protecting the interests of the power elite, or as Churchill termed it, the “High Cabal.” Interestingly, on Dec. 22nd, 1963, just one month after Kennedy’s assassination, Harry Truman published a scathing critique of the CIA in The Washington Post, even going so far as to state “There is something about the way the CIA has been functioning that is casting a shadow over our historic position [as a] free and open society, and I feel that we need to correct it.” The timing of such a scathing quote cannot be stressed enough. Dulles, of course, told the public not to be distressed, that Truman was just in entering his twilight years. In addition, Jim Garrison, New Orleans District Attorney at the time, who was charging Clay Shaw as a member of the conspiracy to kill Kennedy, besides uncovering his ties to David Ferrie who was found dead in his apartment days before he was scheduled to testify, also made a case that the New Orleans International Trade Mart (to which Clay Shaw was director), the U.S. subsidiary of Permindex, was linked to Kennedy’s murder. Col. Clay Shaw was an OSS officer during WWII, which provides a direct link to his knowing Allen Dulles. Garrison did a remarkable job with the odds he was up against, and for the number of witnesses that turned up dead before the trial… This Permindex link would not look so damning if we did not have the French intelligence SDECE report, but we do. And recall, in that report Permindex was caught transferring $200,000 directly to the bankroll of the OAS which attempted the 1962 assassination on de Gaulle. Thus, Permindex’s implication in an international assassination ring is not up for debate. In addition, the CIA was found heavily involved in these assassination attempts against de Gaulle, thus we should not simply dismiss the possibility that Permindex was indeed a CIA front for an international hit crew. In fact, among the strange and murderous characters who converged on Dallas in Nov. 1963 was a notorious French OAS commando named Jean Souetre, who was connected to the plots against President de Gaulle. Souetre was arrested in Dallas after the Kennedy assassination and expelled to Mexico, not even kept for questioning. What Does the Future Hold? After returning from Kennedy’s Nov. 24th funeral in Washington, de Gaulle and his information minister Alain Peyrefitte had a candid discussion that was recorded in Peyrefitte’s memoire “C’était de Gaulle,” the great General was quoted saying: “What happened to Kennedy is what nearly happened to me… His story is the same as mine. … It looks like a cowboy story, but it’s only an OAS [Secret Army Organization] story. The security forces were in cahoots with the extremists. …Security forces are all the same when they do this kind of dirty work. As soon as they succeed in wiping out the false assassin, they declare the justice system no longer need be concerned, that no further public action was needed now that the guilty perpetrator was dead. Better to assassinate an innocent man than to let a civil war break out. Better an injustice than disorder. America is in danger of upheavals. But you’ll see. All of them together will observe the law of silence. They will close ranks. They’ll do everything to stifle any scandal. They will throw Noah’s cloak over these shameful deeds. In order to not lose face in front of the whole world. In order to not risk unleashing riots in the United States. In order to preserve the union and to avoid a new civil war. In order to not ask themselves questions. They don’t want to know. They don’t want to find out. They won’t allow themselves to find out.” The American people would do well to remember that it was first John F. Kennedy, acting as the President to the United States, who was to be declared a terrorist and threat to his country’s national security. Thus is it not natural that those who continue to defend the legacy of Kennedy should be regarded today as threat, not truly to the nation’s security, but a threat to the very same grouping responsible for Kennedy’s death and whom today have now declared open war on the American people. This will be the greatest test the American people have ever been confronted with, and it will only be through an understanding of how the country came to where it is today that there can be sufficient clarity as to what the solutions are, which are not to be found in another civil war. To not fall for the trapping of further chaos and division, the American people will only be able to rise above this if they choose to ask those questions, if they choose to want to know, to want to find out the truth of things they dared not look at in the past for fear of what it would reveal. “Whenever the government of the United States shall break up, it will probably be in consequence of a false direction having been given to public opinion. This is the weak point of our defenses, and the part to which the enemies of the system will direct all their attacks. Opinion can be so perverted as to cause the false to seem true; the enemy, a friend, and the friend, an enemy; the best interests of the nation to appear insignificant, and the trifles of moment; in a word, the right the wrong, the wrong the right. In a country where opinion has sway, to seize upon it, is to seize upon power. As it is a rule of humanity that the upright and well-intentioned are comparatively passive, while the designing, dishonest, and selfish are the most untiring in their efforts, the danger of public opinion’s getting a false direction is four-fold, since few men think for themselves.” -James Fenimore Cooper (1789-1851) We must dare to be among the few who think for ourselves. Tyler Durden Mon, 11/22/2021 - 22:20.....»»

China-based suppliers of ingredients used to produce synthetic opioid fentanyl reportedly raked in more than $27 million in crypto payments. China-based suppliers of chemical precursor – ingredients used to produce synthetic opioid fentanyl – raked in more than $27 million in crypto payments, according to a research report by Elliptic. Exporting fentanyl precursors and cryptocurrency are banned in mainland China. Crypto payments to Fentanyl Ingredient Suppliers Up 450% Year-over-Year Research by blockchain analysis provider Elliptic found that firms based in China received more than $27 million in crypto payments, primarily Bitcoin, for supplying chemical ingredients used to produce fentanyl. According to the report, Elliptic’s team of researchers received offers from over 90 Chinese companies to supply precursors – essential chemical ingredients used in the production of fentanyl. 90% of those firms offered crypto as one of the primary payment methods, with Bitcoin being the most popular cryptocurrency, followed by Tether’s stablecoin USDT. The report also states that the number of crypto payments to precursor suppliers surged 450% year-over-year. The $27 million that suppliers received is enough to purchase enough precursor to manufacture fentanyl pills with a street value of around $54 billion, Elliptic says. Fentanyl is a powerful synthetic opioid similar to morphine but is fifty to a hundred times more potent, according to National Institute on Drug Abuse (NIDA). Fentanyl overdoses are currently the leading cause of death for those aged between 18 and 45 in the US. Mexico Drug Cartels Replaced China as Top Illicit Fentanyl Exporter Thanks to its strong potency, and the fact that it is significantly cheaper to produce than heroin, fentanyl has become one of the biggest sources of profits for international drug cartels. For several years, China was the world’s largest exporter of illicit fentanyl; however, in 2019, Beijing banned its exports following intense diplomatic pressure from the US government. But that did not stop the unprecedented illicit fentanyl imports into the US. Fentanyl imports into the US soared as Mexican cartels started to produce the drug using precursors imported from China. Elliptic researchers shared their experience with the Chinese precursor suppliers, who reportedly showed no concerns about how precursors would be used following the sale. Moreover, some suppliers noted how the chemicals were their best-selling product, while others even disclosed that they sold it to Mexico-based customers. Elliptic asked the suppliers whether buyers from Mexico used crypto to pay for the product, with one of them responding: “They always use USDT or Bitcoin to pay. It is no problem.” Crypto has become an increasingly popular payment method for those engaging in illicit activities in recent years. Earlier this month, a White House report revealed that around 50% of North Korea’s missile and nuclear programs are funded by stolen crypto funds. The East Asian country is responsible for some of the biggest crypto hacks, stealing around $1 billion in cryptocurrencies in 2022. This article originally appeared on The Tokenist Sponsored: Find a Qualified Financial Advisor Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now......»»

South Korea Says Its Chipmakers Can Fill Void After China Bans Micron Over 'Security Risk' Hours after China banned Micron Technology's semiconductor products from critical infrastructure projects over a 'major national-security risk,' Seoul has stepped up and said South Korean companies Samsung and SK Hynix would fill the void as tensions between the US and China continue to escalate, reported Financial Times.  Even though the White House has urged South Korea to stop its chipmakers from supplying China if Beijing banned Micron from selling chips, policymakers in Seoul said Monday they would allow companies to make their own decision, independent of Washington's request: "Regarding what the US tells us to do or not to do, it is actually up to our companies. Both Samsung and SK Hynix, with global operations, will make a judgment on this," South Korea's vice-minister of trade Jang Young-jin told reporters. We detailed Beijing's ban on Micron Sunday night, as it's a retaliation strike over a sweeping US ban on Western companies from selling advanced chip-making technology to China. In other words, it's a tit-for-tat tech war. However, Financial Times pointed out Washington might have leverage over Samsung and SK Hynix, which both are trying to expand business operations in the US and need "one-year waivers from the country to be extended so they can ship new equipment into their chip fabrication facilities in China .... these waivers must be renewed later this year, giving Washington potential leverage to use against the companies." An industry exec told FT: "There are not many Chinese companies that get chips only from Micron. Even if we increase our supply to Chinese customers, how can they examine all these deals individually and judge that the increased volume comes from us, replacing Micron's?" FT noted: "While South Korea is not a member of the G7, the group said it would work on creating a mechanism with a broad set of partners to deter and respond to Beijing's use of economic sanctions to further its geopolitical goals." "Memory is a commodity, and supply chains will adjust in a couple [of] quarters," said SemiAnalysis' chief analyst Dylan Patel. He stated China could easily swap Micron's memory chips for Samsung or SK Hynix ones.  Patel believes long-term damage to Micron will be 'manageable.'  Meanwhile, shares of Micron slid nearly 5% early in the US cash session.  As previously mentioned, Gavekal Dragonomics estimates that 10% of Micron's revenue is derived from China. The tech war between the US and China is ongoing, with no signs of de-escalation. Tyler Durden Mon, 05/22/2023 - 13:25.....»»

The Biden administration has U-turned regarding supplying US-built F-16 fighter jets to aid Ukraine's war with Putin's Russia. U.S. President Joe Biden listens as G7 leaders participate in an event on global infrastructure and investment during the G7 Summit on May 20, 2023 in Hiroshima, Japan.Susan Walsh - Pool/Getty Images President Biden said he received "flat assurance" that Ukraine would not use F-16s to enter Russia.  The US president also announced another $375 million in military assistance to Ukraine. "Vladimir Putin will not break our resolve," Biden said at the G7 summit press conference on Sunday. President Joe Biden said he received "flat assurance" from Ukrainian President Volodymyr Zelenskyy that Ukraine would not use F-16 fighter jets to attack Russian territory."I have a flat assurance from Zelensky that they will not, will not, use it to go into Russian geographic territory," Biden told reporters at the end of the annual G7 summit in Japan on Sunday, according to The Washington Post. It's the latest development marking a drastic shift by US President Joe Biden and US officials, who have long rejected authorizing F-16s in Ukraine.In February, Sen. Jack Reed, the top Democrat on the Senate Armed Services Committee, portrayed supplying F-16s to Ukraine as unfeasible.But on Friday, the US authorized Western allies to provide F-16 jets to Ukraine to defend itself, assist in training pilots, and possibly send fighter jets from American stockpiles, Insider previously reported. Earlier this week, UK Prime Minister Rishi Sunak announced the UK and the Netherlands would build an "international coalition" to help the country procure the fighter jets. Ukraine sees the F-16s as indispensable to their cause, a defense expert recently told Insider.Two US Air Force F-16 Fighting FalconsUS Air Force photo by Tech. Sgt. Matthew LotzThe US president also announced another $375 million in military assistance to Ukraine to help support its long-running and bloody battle with Putin's regime. Biden said at a press conference in Hiroshima that "Vladimir Putin will not break our resolve" and reiterated the G7 countries' "shared and unwavering commitment to stand with the brave people of Ukraine as they defend themselves against Russia's brutal war of aggression and the war crimes being committed."Zelenskyy appeared at the conference, the first in-person since Russia's invasion, in an appeal to seek more aid for the country, Insider reported."I am here in Hiroshima so the world can hear the Ukrainian call for unity. Russia has trampled on everything that is civilized," Zelenskyy said at the summit on Sunday. Read the original article on Business Insider.....»»

US Futures, Global Markets Rise On Continued Debt Ceiling Optimism Futures are slightly higher following yesterday’s strong session driven by what the narrative says is debt ceiling deal optimism after US President Biden said he was confident the US would avoid a default, although how rising stocks - which eases pressure for a debt deal - makes a deal more likely is beyond us. S&P futures were up 0.2%, pointing to a second day of gains for the index, and US regional lenders kept up their momentum in premarket trading, with Western Alliance Bancorp adding 2% and PacWest Bancorp up 6%; longer-dated bond yields are up 1-2bps, with the 10Y TSY trading at 3.60%. USD strength continues despite many investors indicating potential weakness into the x-date; commodities are weaker across all three siloes after the Black Sea Grain Initiative was extended by 2 months, reducing near-term inflation risk. Biden says another debt ceiling update will come Sunday after positive momentum in negotiations. Today, we receive WMT earnings which beat beat on revenue, earnings and comps, pushing the stock higher and a further read on the consumer plus jobless data. In premarket trading, Walmart shares rose as much as 2.7% after the retailer boosted its adjusted earnings per share forecast for the full year. Peer Target, which maintained its year forecast on Wednesday, is also trading higher after the report. Cisco Systems shares fall as much as 3.9% in premarket trading on Thursday, after the largest network-gear maker said orders declined in the past quarter. Analysts noted that product orders slowed faster than anticipated, but remained positive about the company’s backlog driving growth. Here are some other notable premarket movers: Alibaba shares fell as much as 2.4% before paring losses after the Chinese e-commerce firm reported quarterly sales that missed analyst estimates, dragged down by a weaker-than-expected core China commerce unit. Bath & Body Works gains 9.5% after stronger-than-expected fiscal first-quarter results prompt the retailer to increase its earnings per share forecast for the year. Boot Barn shares tumble 16% after the cowboy-boot seller reported fourth-quarter net sales that missed estimates and provided a forecast for the year that failed to match expectations. The results left analysts disappointed, with Citi highlighting a sizable miss in same store sales and Piper Sandler noting that the FY24 EPS guidance had been impacted by investments in new stores and a new distribution center. Canada Goose shares climb as much as 14% after the pricey parka maker reported fourth-quarter results that topped analysts’ estimates, and boosted its 2024 revenue guidance. Micron rises as much as 2.4% in premarket trading following news, citing people familiar with the matter, that Japan is poised to provide about ¥200 billion ($1.5 billion) in incentives to help the semiconductor company make next-generation memory chips in the country. WeWork shares rise as much as 10% in US premarket trading, before paring the gain to 3.6%, following a record plunge for shares in the co-working company on Wednesday after the sudden departure of its CEO. Take-Two Interactive Software shares rise as much as 11% in premarket trading, putting it on course to hit a year-high if gains hold, after the video-game company reported its fourth-quarter results and hinted at a release date for the next version of its popular Grand Theft Auto franchise. Analysts were positive as they speculated that GTA VI is among several games in the pipeline. Western Alliance and PacWest Bancorp advance in US premarket trading, set to continue Wednesday’s strong gains after Western Alliance Bancorp said deposits had grown by more than $2 billion since the quarter’s end. StoneCo drops 2.1% in US premarket trading after the company’s first-quarter payment volumes fell short of Wall Street estimates despite an increase over the same period a year earlier, and software revenue showed signs of weakness. 10x Genomics said it won an injunction in its patent litigation against NanoString Technologies and NanoString Technologies Germany. NanoString (NSTG US) shares fell 7% in US postmarket trading. Snowflake has been in advanced talks to acquire search startup Neeva, the Information reports, citing unidentified people who do business with Snowflake.Shares of Snowflake rose 2.9% in postmarket trading following the report The recent market upside reflects both the progress in Washington and some good news out of embattled US regional lenders. Bank stocks rebounded this week after Western Alliance reported an increase in deposits, easing concern that the industy will succumb to losses on bond investments and a flight by depositors. Taken together, they’re keeping hopes alive that the US will avert a recession and giving way to soft-landing bets after one of the most aggressive Fed tightening cycles in history. “If the headwinds of banking crisis and debt ceiling recede and consumers stays reasonably resilient, the recession risk may recede,” said Roger Lee, head of UK equity strategy at Investec Bank Plc. Bets on a relief rally were reflected in the VIX which fell below 17 to close at the lowest level since the start of the month. President Joe Biden expressed confidence there will be no US default, and House Speaker Kevin McCarthy said reaching an agreement this week is “doable.” JPMorgan chief Jamie Dimon said the US government “probably” will not default on its debt after he and other bank leaders met in Washington to discuss the debt limit. Investor attention later turns to initial US jobless claims data, which could provide clues on what the Federal Reserve intends to do next in its monetary policy tightening campaign. Earnings due from Walmart Inc. will provide insights on the state of the economy and the American consumer. European stocks are firmly in the green following gains on Wall Street on Wednesday and Asia overnight after US President Biden said he was confident the US would avoid a default. The Stoxx 600 is up 0.5% with autos, tech and banks the strongest-performing sectors while utilities and miners fall; markets in Nordic countries and Switzerland are closed for holidays Thursday. Here are the most notable European movers: Aston Martin Lagonda shares jump as much as 25% after China’s Geely commits £234 million to become the third-largest shareholder in the British luxury carmaker. Genuit rises as much as 6.5% after the plastic-piping system manufacturer says it now expects full-year operating profit to be slightly ahead of current consensus for the year. That prompts analysts to raise their estimates. Petrofac shares rise as much as 12% after a joint venture led by the oil services company alongside China Huanqiu Contracting & Engineering Corporation was conditionally awarded a $1.5b petrochemical EPC contract by Sonatrach subsidiary STEP Polymers. ConvaTec shares gain as much as 3.3% after the wound care and ostomy products firm raised its organic growth guidance, offsetting a small miss for the first four months of the year. Vistry shares rise as much as 4.2%, hitting the highest since August, after the UK homebuilder raised its guidance and analysts highlighted how its model — split between building and partnerships — is proving a unique differentiator to its competitors. EasyJet shares fluctuated in a narrow range in early trading after the low-cost airline’s FY results, with analysts saying there were scant surprises given the group issued a trading update in April, though the tone of the statement remains positive. BT shares fall by as much as 10%, their biggest decline since November, after the UK telecom operator retained capital spending at a high level to aid its fiber buildout, a move that came at a cost of a lower-than- expected cash flow target. Burberry shares drop as much as 6.2%, the most since March 13, after the British luxury goods company reported results. Morgan Stanley said the fiscal 2024 profitability forecast suggests Ebit will be slightly below consensus estimates, while RBC said the pace of recovery in the Asia-Pacific region might not be as strong as market expectations. International Distributions Services falls as much as 5.5% after the Royal Mail owner’s downbeat outlook overshadows slightly better-than-expected full-year earnings. Future plc shares slump as much as 19%, dropping to the lowest level since April 2020, after the international multimedia company issued a profit warning for the full year. A gauge of Asian stocks headed for its biggest gain since March, with benchmarks in Australia, Hong Kong and South Korea advancing. Japan’s Topix index climbed around 1% to set a fresh 33-year high. Gains in Alibaba Group Holding Ltd. ahead of its earnings release spurred tech stocks higher in both Hong Kong and Japan. Chipmakers were among best performers on the Nikkei 225 on government plans to boost the country’s domestic semiconductor sector. ASX 200 was led by outperformance in tech and strength in the financial and commodity-related sectors but with advances contained after disappointing jobs data which showed a surprise contraction in Employment Change and an uptick in the Unemployment Rate. Nikkei 225, which just surpassed 30,000 yesterday, surged more at the open amid reports of potential Japanese subsidies for chipmakers following PM Kishida’s meeting with foreign chip executives. However, the index then stalled just short of its best levels in over three decades and after weaker-than-expected trade data. Hang Seng and Shanghai Comp. were positive amid the broad risk appetite but with further upside somewhat limited by the disappointment from Tencent’s earnings which posted a 27% rise in net profit but missed against expectations, while it was also reported that Montana became the first US state to ban TikTok which will take effect from January next year. In India, key stock gauges in India fell for the third straight day as ITC and State Bank of India retreated after their earnings. The S&P BSE Sensex fell 0.2% to 61,431.74 in Mumbai, while the NSE Nifty 50 Index declined 0.3% to 18,129.95. Indian market underperformed their Asian peers as the MSCI Asia-Pacific Index climbed 0.7% for the day. ITC and SBI were among the top two contributors to Sensex’s decline. Indian stocks have seen profit booking in the last three sessions after nearing their record highs earlier as concerns persist over valuations and recovery in rural demand. Out of 30 shares in the Sensex index, 10 rose, while 20 fell In FX, the Bloomberg Dollar Spot Index rose for a third day as much as 0.4% to 1,237.32, its highest since late March; the US currency climbed to a six-month high of 137.94 yen, while the euro slumped to 1.0806, its weakest since early April. Across FX trading, the Norwegian krone and Swedish krona are the weakest currencies. In China, the yuan fell for a third day, dropping further past the key 7 per dollar level, even after the PBOC set a stronger-than-expected currency fixing; USD/CNH rose 0.5% to 7.0433; USD/CNY gained 0.5% to 7.0277. Positive dollar momentum continues after US President Joe Biden expressed confidence that negotiators would reach an agreement to avoid a catastrophic default, seeking to reassure markets before he departs on a trip to Japan In rates, treasuries extended Wednesday’s losses, with yields cheaper by 1.5bp to 3bp across the curve, as optimism about a US debt-ceiling resolution lifts S&P 500 futures to weekly highs.  Losses led by long-end of the curve into early US session; 2s10s, 5s30s spreads unwind a portion of Wednesday’s flattening move, widening 1.5bp and 0.5bp on the day. The yield on the two-year Treasury edged up around 1 basis point to 4.17%, matching a three-week high hit the previous day; yields on longer-dated maturities rise around 2 basis points, slightly steepening the yield curve. 10-year yields sit around 3.60%, cheaper by 3bp vs prior day’s close whille German and UK 10-year borrowing costs rise by 6bps and 4bps respectively. The IG issuance slate is empty so far; ten companies priced almost $9b Wednesday, taking weekly total above $57b, on pace to be the second busiest week of the year so far. Traders reduced bets for the possibility of Fed rate cuts in the coming months; pricing suggests around 30 basis points of cuts by November, and 52 basis points by December, down from around 60 basis points on Wednesday. In commodities, Crude futures decline with WTI falling 0.5% to trade near $72.50. Spot gold drops 0.3% to around $1,976. Bitcoin rises 0.1%. Bitcoin was incrementally firmer though ranges are very slim with specifics limited ahead of a busy US session; currently, BTC is just shy of USD 27.5k. To the day ahead now, and data releases from the US include the weekly initial jobless claims, existing home sales for April, the Conference Board’s leading index for April, and the Philadelphia Fed’s business outlook for May. Otherwise from central banks, we’ll hear from the Fed’s Jefferson, Barr and Logan, ECB Vice President de Guindos and the ECB’s Muller, along with BoE Governor Bailey and the BoE’s Broadbent, Ramsden and Pill. Finally, earnings releases include Walmart. Market Snapshot S&P 500 futures up 0.2% to 4,178.00 MXAP up 0.7% to 162.21 MXAPJ up 0.5% to 513.62 Nikkei up 1.6% to 30,573.93 Topix up 1.1% to 2,157.85 Hang Seng Index up 0.9% to 19,727.25 Shanghai Composite up 0.4% to 3,297.32 Sensex up 0.1% to 61,639.27 Australia S&P/ASX 200 up 0.5% to 7,236.78 Kospi up 0.8% to 2,515.40 STOXX Europe 600 up 0.6% to 466.69 German 10Y yield little changed at 2.40% Euro down 0.2% to $1.0815 Brent Futures down 0.4% to $76.64/bbl Gold spot down 0.4% to $1,974.48 U.S. Dollar Index up 0.23% to 103.12 Top Overnight News China's fiscal revenue rose 11.9% in the first four months of 2023 from the same period a year earlier, accelerating sharply from a 0.5% rise in January-March, official data showed, as the economy stages a gradual but uneven post-COVID recovery. Fiscal revenue totaled 8.32 trillion yuan ($1.20 trillion)in the first four months while fiscal expenditure grew 6.8% to 8.64 trillion yuan, the ministry said in a statement on Thursday. RTRS China’s embrace of artificial intelligence for warfare has touched off alarm bells everywhere from Silicon Valley to the Pentagon. Former Google Chief Executive Officer Eric Schmidt is among those raising concerns, and he testified at a House hearing about China Wednesday evening as head of an initiative that’s focused on speeding the US defense establishment’s adoption of AI. BBG Australia employment unexpectedly dipped in April after two months of outsized gains, and the jobless rate also ticked up in a sign the red-hot labor market might be cooling, bolstering the case for a pause in interest rate hikes next month. RTRS Seven of the world’s largest semiconductor makers have set out plans to increase manufacturing and deepen tech partnerships in Japan as western allies step up efforts to reshape the global chip supply chain amid rising tensions with China. At an unprecedented meeting in Tokyo with Japanese prime minister Fumio Kishida, the heads of chipmakers including Taiwan Semiconductor Manufacturing, South Korea’s Samsung Electronics and Intel and Micron of the US described plans that could transform Japan’s prospects of re-emerging as a semiconductor powerhouse. FT Russia acknowledges it has “problems” with oil/gas revenues slumping given Western sanctions and restrictions (energy revenue fell by more than 50% in Q1 Y/Y). FT Deutsche Bank has agreed to pay $75 million to settle a proposed class-action lawsuit charging that the financial institution facilitated Jeffrey Epstein’s sex-trafficking ring, said lawyers who sued the bank on behalf of alleged victims. WSJ A fresh push by Britain and the Netherlands to provide Ukraine with F-16 fighter planes has exposed the latest fault line among Western allies who have wrangled repeatedly over sending powerful weapons of war, once again pitting a reluctant United States against some of its closest European partners. NYT Holders of the Credit Suisse debt wiped out in March forced the regulator to release the order that justified it. A Swiss court told Finma to release the decree that let Credit Suisse wipe out about $17 billion of AT1 notes, documents show. CDS tied to CS subordinated debt are down after a panel ruled the wipe-out won’t trigger a payout. One-year CDS were indicated at 392 bps, according to CMAI data, down about 390 bps from yesterday. BBG US commercial real estate prices fell in the first quarter for the first time in more than a decade, according to Moody’s Analytics, heightening the risk of more financial stress in the banking industry. The less than 1% decline was led by drops in multifamily residences and office buildings, data culled by Moody’s from courthouse records of transactions showed. BBG Foreign sales accounted for 29% of the $16 trillion of aggregate S&P 500 revenues in 2022, unchanged from 2021. The largest regional non-US exposures were Asia Pacific (9%, $1.3 trillion) and Europe (6%, $919 billion). Based on company filings, just 2% percent of S&P 500 revenues ($378 billion) were explicitly derived from Greater China. Only one sector generates more than half of its revenues overseas: Information Technology (60%). The 1% YTD weakening of the trade-weighted US dollar has supported the stock performance of international-facing US companies, but stocks have outpaced their typical relationship with the currency. GIR A more detailed look at global markets courtesy of Newsquawk APAC stocks were higher as the region took its cue from the momentum on Wall Street where stocks rallied amid optimism amongst regional banks and debt ceiling talks, although some of the gains were capped as participants digested soft data releases. ASX 200 was led by outperformance in tech and strength in the financial and commodity-related sectors but with advances contained after disappointing jobs data which showed a surprise contraction in Employment Change and an uptick in the Unemployment Rate. Nikkei 225 surged at the open amid reports of potential Japanese subsidies for chipmakers following PM Kishida’s meeting with foreign chip executives. However, the index then stalled just short of its best levels in over three decades and after weaker-than-expected trade data. Hang Seng and Shanghai Comp. were positive amid the broad risk appetite but with further upside somewhat limited by the disappointment from Tencent’s earnings which posted a 27% rise in net profit but missed against expectations, while it was also reported that Montana became the first US state to ban TikTok which will take effect from January next year. Top Asian News China's ambassador to Australia said China will resume imports of Australian timber from today and that it is in communication with Australia for a convenient time regarding a PM visit, according to Reuters. Montana's Governor signed the bill to ban TikTok which prohibits mobile application stores from offering TikTok within the state effective January 2024, while TikTok commented that the Montana law infringes on the First Amendment rights of the people of Montana, according to Reuters. New Zealand Budget forecasts 2023/24 GDP at 1.0% (prev. -0.3%) and sees the unemployment rate at 5.0% (prev. 5.5%), while the Treasury no longer expects the country to move into a recession, according to Reuters. European bourses are firmer across the board, Euro Stoxx 50 +1.1%, following Wednesday's firmer Wall St. action and a relatively solid APAC lead; within Europe specifically, action is slightly limited by partial Ascension Day closures. Sectors are mostly positive with Autos/Parts outperforming amid Volkswagen strength while Real Estate & Basic Resources lag. Stateside, futures post upside of circa. 0.2%; though, ultimately, the sideways action continues as we await WMT and more substantive debt updates. Top European News UK PM Sunak is to agree on a historic deal on security with Japan amid rising tensions with China and will sign the 'Hiroshima Accord' on Thursday ahead of the G7 meeting, according to The Telegraph. Furthermore, it was noted that the UK is to step up defence cooperation with Japan to uphold stability in Indo-Pacific with the Hiroshima Accord to include doubling the UK troop numbers in upcoming joint exercises and committing to deploy a carrier strike group to the Indo-Pacific in 2025, while the UK and Japan will launch a semiconductor partnership with commitments to pursue cooperation, skills exchange & bolstering supply chain resilience, according to a statement. UK PM Sunak considers following the US lead on Chinese investment curbs, according to the FT. Germany is reportedly proposing forcing EU firms to include "no Russia clauses" when some high-tech goods are sold to certain nations, via Politico citing a paper. ECB's de Guindos says there is still scope to keep raising interest rates, though most of tightening has already been done. ECB's Muller says it is premature to expect the ECB to cut rates in early 2024 BoE Governor Bailey says he does not envisage BoE balance sheet returning to where it was before the financial crisis; Deputy Governor Ramsden says QT has some effect on the economy, but fairly small; reiterates QT will be gradual and predictable, there's potential for QT sales number to go up, but does not see it going down. Broadbent says they received reports that GBP 100bln p.a. of QT may disrupt market liquidity, thus BoE decided on GBP 80bln p.a. FX DXY inches further above 103.000 to 103.170 as Yuan extends to the downside through key chart levels (50% Fibs). Aussie also undermined by weaker than forecast jobs data as AUD/USD retreats towards sub-0.6650 midweek lows. Euro relying on option expiries to hold above 1.08000 and Yen on psychological support to keep afloat of 138.00. Pound on backfoot after just below 1.2500 as BoE members deliver QE testimony in Parliament. Kiwi retains 0.6200+ status after improved NZ budget balances and economic forecasts. PBoC set USD/CNY mid-point at 6.9967 vs exp. 6.9985 (prev. 6.9748) Fixed Income Debt descending further on Ascension Day as props in futures and resistance in yields are breached. Bunds down to 134.58 from 135.44 and 10 year cash probing 2.40%, Gilts near base of 99.65-100.11 range and T-note closer to 114-13 than 114-24 ahead of US data, Fed speakers and 10 year TIPS auction. Commodities WTI and Brent front-month futures are softer intraday following some overnight consolidation after yesterday’s risk-led rally. Spot gold bears the brunt of a firmer Dollar and broader risk appetite. Base metals are trading off a similar theme, with modest pressure emanating from the firmer Dollar. Qatar Energy set July Al-Shaheen crude term price at a premium of USD 1.03/bbl above Dubai quotes, according to traders. Russia's Kremlin confirms the extension of the Black Sea grain deal by two months. Geopolitics Air raid alerts were declared throughout Ukrainian territory. It was later reported that Kyiv's mayor Klitschko noted explosions in the city and that a fire broke out in the east of the city from falling debris, while he added that an air attack was continuing on Kyiv, according to Reuters. China's Foreign Ministry said China's special envoy of Eurasian affairs visited Ukraine on May 16th-17th and met with Ukrainian President Zelensky. China's Foreign Ministry said there is no panacea for resolving the crisis and all parties need to create conditions for peace to stop the war, while it added that China and Ukraine agreed should work together to continue mutual respect and sincere treatment, as well as keep mutually beneficial cooperation moving forward, according to Reuters. US Event Calendar 08:30: May Initial Jobless Claims, est. 252,000, prior 264,000 08:30: May Continuing Claims, est. 1.82m, prior 1.81m 08:30: May Philadelphia Fed Business Outl, est. -20.0, prior -31.3 10:00: April Existing Home Sales MoM, est. -3.2%, prior -2.4% 10:00: April Leading Index, est. -0.6%, prior -1.2% Central Bank Speakers 09:05: Fed’s Jefferson Gives Speech on Economic Outlook 09:30: Fed’s Barr Testifies Before Senate Banking Committee 10:00: Fed’s Logan Speaks at Texas Bankers Association Convention DB's Henry Allen concludes the overnight wrap Risk appetite returned to markets over the last 24 hours as investors grew more optimistic that a resolution would be reached on the US debt ceiling. We didn’t actually get much in the way of concrete developments, but negotiations are continuing and the mood was lifted by the fact that all the major players reiterated they want to avoid a default, which helped to reassure market participants. In turn, that meant the S&P 500 (+1.19%) put in its best performance in nearly two weeks, whilst other risk assets like oil and HY credit outperformed as well. In terms of the latest, President Biden gave a brief press conference yesterday, where he said “I’m confident that we’ll get the agreement on the budget and that America will not default”. Not long afterwards, Republican House Speaker McCarthy then added that reaching a deal this week was “doable”, so at least in principle, the main participants in the negotiation are indicating a deal can be reached. Biden is now travelling to the G7 leaders’ summit over the weekend in Japan, but he said that he’d stay in contact with the negotiators and Speaker McCarthy, and that he’d also hold a press conference on Sunday. He also noted that he did not expect a deal to be reached before his return. Biden has already cancelled his subsequent visits to Papua New Guinea and Australia to get back to the US early, which indicates how this is the main focus for the administration at the moment. With the more encouraging news on the debt ceiling, the S&P 500 advanced by +1.19%, with the gains driven by the more cyclical sectors such as banks (+4.5%), autos (+4.0%), semiconductors (+2.4%), and Transports (+2.2%). Meanwhile the only subindustries that were lower on the day were defensives like utilities (-0.4%), household products (-0.3%), Pharma (-0.3%), and Food & Beverage (-0.2%). Similar to previous days, megacap tech stocks outperformed and the latest rise in the FANG+ index (+1.28%) takes its YTD gains up to +48.09% now. Looking at a longer horizon it’s striking how much equities have been in a holding pattern over the last couple of weeks. To put yesterday’s equity move in context, the S&P 500 had moved by less than 0.7% in either direction over each of the previous 7 sessions, and if yesterday had seen an 8th that would have been the longest run of such small moves since November 2021. On the rates side, the more positive news of the last 24 hours meant that investors grew more sceptical that the Fed would be pivoting towards rate cuts this year. For instance, the rate priced in for the December meeting rose a further +5.4bps yesterday to 4.538%. And there’ve even been a few noises about another rate hike at the next meeting in June. We should stress this isn’t the consensus view, but at one point intraday, futures went as far as pricing in a 30% chance of a June hike, which is the highest since the Fed’s most recent decision a couple of weeks ago. By the end of the session that was back down to 20%, so it’ll be interesting to hear from various Fed speakers over the next couple of days to see what their views on the matter are. These shifting expectations about rate hikes led to a selloff among US Treasuries, and several milestones were set across a range of maturities. At the very front-end, the 3-month T-bill yield (+7.7bps) closed at a post-2001 high of 5.22%. And looking further out, the 10yr yield was up +3.0bps on the day to 3.564%, whilst the 30yr yield (+1.2bps) even hit its highest level since the SVB collapse in early March, with an increase to 3.854%. Otherwise, sentiment was further bolstered by the latest data on US housing, with fresh signs that US housing starts were stabilising after their decline in 2022. For instance, they rose to an annualised rate of 1.401m in April (vs. 1.400m expected), which in turn prompted the Atlanta Fed to raise their GDPNow estimate for Q2 up to an annualised rate of +2.9%. Back in Europe it was a much quieter day, and the STOXX 600 (-0.15%) ended the day slightly lower. For sovereign bonds there was a better performance however, and yields on 10yr bunds (-1.7bps), OATs (-1.8bps) and BTPs (-3.8bps) all moved lower. The main outlier were UK gilts, with 10yr yields up +2.1bps following a speech from BoE Governor Bailey in which he said that “the unwinding of second-round effects may take longer than it did for them to emerge”, and that the MPC would “adjust Bank Rate as necessary” to get inflation back to target. Overnight in Asia, the main equity indices have followed the pattern from Wall Street as investors grow hopeful that a resolution on the debt ceiling will be reached. That’s supported a rally across the region, with gains for the Nikkei (+1.53%), the Hang Seng (+1.11%), the Shanghai Comp (+0.78%), the KOSPI (+0.59%) and the CSI 300 (+0.38%). For the Nikkei, that marks its 6th consecutive advance, and takes its YTD gains up to +17.07%. It also leaves the index less than half a per cent away from surpassing its recent closing peak in September 2021, which would take it up to its highest closing level since 1990. Looking forward however, that momentum doesn’t seem to be carrying over elsewhere, with futures on the S&P 500 posting a modest -0.06% decline. Elsewhere overnight, we’ve also had some fairly soft employment data from Australia, where the economy shed -4.3k jobs in April (vs. +25.0k expected). That meant the unemployment rate ticked up to 3.7%, which has dampened expectations that the RBA will continue hiking at their next meeting. Separately, Japanese trade data showed that imports fell -2.3% on a year-on-year basis in April (vs. -0.6% expected), marking the first decline since January 2021. Export growth was also a bit weaker than consensus at +2.6% (vs. +3.0% expected). To the day ahead now, and data releases from the US include the weekly initial jobless claims, existing home sales for April, the Conference Board’s leading index for April, and the Philadelphia Fed’s business outlook for May. Otherwise from central banks, we’ll hear from the Fed’s Jefferson, Barr and Logan, ECB Vice President de Guindos and the ECB’s Muller, along with BoE Governor Bailey and the BoE’s Broadbent, Ramsden and Pill. Finally, earnings releases include Walmart. Tyler Durden Thu, 05/18/2023 - 08:10.....»»

Futures Rise Amid Renewed Hope For Debt Ceiling Breakthrough US stock futures crept higher on Wednesday and traded near the best levels of the session, as investors remained focused on debt ceiling talks while negotiators seek a framework agreement for Joe Biden and Kevin McCarthy to review upon the president’s return from a truncated trip to Asia. Contracts on the S&P 500 were up 0.3% as 7:45am ET a.m. while Nasdaq 100 futures added 0.2%. Europe's Estoxx50 little changed on the day; while Japan's Nikkei 225 closed above the 30,000 for the first time since September 2021 a day after the Topix closed at its highest level in more than three decades. Treasuries are slightly richer across the curve with spreads broadly within 1bp-2bps of Tuesday’s close while the dollar is flat. Oil rebounded from an earlier drop concerns over demand in China and expectations of rising stockpiles in the US. Iron ore continues its week in the green, while gold and bitcoin declines. In premarket trading, Western Alliance Bancorp jumped as much as 9.8% after the regional lender reported growth in deposits this quarter, soothing concerns after it was caught up in the turmoil engulfing the US regional banking sector. Tesla rose as much as 1.7% in premarket trading on Wednesday, as CEO Elon Musk said the electric-car maker will “try a little advertising and see how it goes.” This is a major shift for the company that’s largely avoided traditional marketing to sell its vehicles. Manchester United gained after Bloomberg reported that Sheikh Jassim Bin Hamad J.J. Al-Thani submitted an improved offer for the football club. Here are some other notable premarket movers: Doximity drops as much as 11% in premarket trading on Wednesday, after the health-care software company gave a weaker-than-expected 1Q forecast due to delayed product launches. Analysts note that the outlook puts a lot of pressure on the company to ramp in the second half of the year. Gates Industrial Corp. declined 1.4% postmarket after leading holder Blackstone offered 22.5 million shares via Citigroup, Evercore ISI, Goldman Sachs. Maxeon Solar Technologies dropped 6% postmarket after the solar-panel maker offered 5.1 million shares and leading holder TotalEnergies offered an additional 1.7 million via BofA Securities, Morgan Stanley. Intapp Inc. fell 5.2% postmarket after the software company offered 2 million shares and selling stockholders offered 4.25 million via BofA Securities, Barclays. Container Store tumbled 17% in post-market trading Tuesday after its full- year net sales forecast fell short of the average of analysts’ estimates. Vivid Seats dropped 12% postmarket as selling stockholder Hoya Topco LLC offers 16m Class A shares via Citigroup, Morgan Stanley. A rally that lifted global stocks by almost 9% this year through the end of April reversed this month as the debt-ceiling standoff compounded fears about an economic slowdown and outweighed a better-than-feared corporate earnings season.  “That is leading to the reason why equity markets have stalled over the last couple of weeks because you are not really paid now to make big bets ahead of this event,” Grace Peters, JPMorgan Private Bank’s head of investment strategy, said in an interview with Bloomberg TV. Still, the calm in equity indexes “hides a lot of movement under the surface,” said Marija Veitmane, senior multi-asset strategist for State Street Global Markets.“Our favorite trade is preference for growth stocks over value as we believe that recession is inevitable so earnings are likely to falter, while growth should get some support from falling rates.”  Negotiators are seeking a framework agreement to review upon President Joe Biden’s return from a truncated trip to Asia. Any breakthrough in the talks would give markets cause to rally, dissipating one of the biggest tail risks weighing on sentiment. “Longer term, that would be a dip that we would buy if that were to come to pass,” Peters said. “The market does ultimately I think assume this will get resolved.” In the meantime, Treasury bills maturing after June 1 are under pressure, as costs to insure Treasuries in the credit-default swap market surge. Meanwhile, strategists at Goldman Sachs Group said artificial intelligence offers the biggest potential long-term support for US profit margins, although they warned there’s high uncertainty around AI’s impact. AI can boost net margins by nearly 400 basis points over a decade, strategists led by Ben Snider wrote in a note. European stocks are slightly lower as risk sentiment struggles to gain any real traction with US debt ceiling negotiations making only glacial progress. The Stoxx 600 is down 0.1% with real estate, financial services and retail the worst performing sectors while miners and travel stocks rise. Here are the most notable European movers: Argenx shares rise as much as 5.8% after Bloomberg reported several major drugmakers keen to expand in immunology have been studying the biotech and have it at the top of their wish lists Aegon shares climb as much as 5.6% after the Dutch insurance company’s 1Q capital generation before holdco costs beat consensus expectations, suggesting modest consensus upgrades, Citi says SAP shares rise as much as 1.9% after the software giant projected sales growth to accelerate beyond 2025, a bullish ambition as the firm’s transition to cloud bears fruit, according to analysts Watches of Switzerland shares fall as much as 12%, to the lowest since September 30, after the top seller of Rolex timepieces in the UK said it expects a decline in first-quarter sales Commerzbank declines as much as 7.9%, worst performer on the Stoxx 600 Banks Index, as analysts say an increase in guidance for FY net interest income is not enough, as it only matches consensus Experian shares decline as much as 5.7%, reaching the lowest since March, after the consumer credit reporting company’s organic revenue forecast for the year failed to match expectations British Land declines as much as 5.1% after the landlord’s FY results showed net asset values for the group fell more than expected. Jefferies noted the decline was worse than for rival Land Securities Ubisoft shares sink as much as 11% after the French video-game company’s quarterly bookings and outlook for the current quarter came in well below expectations Euronext shares decline as much as 5.5% as analysts point to limited room for consensus change after the French stock-market operator offered no adjustment to 2023 cost guidance JD Sports drops as much as 5.2% after the sports retailer reported a FY gross profit margin that missed estimates. RBC flagged the gross profit margin being below their expectations Zurich falls as much as 3.6% after the insurer’s presented “relatively solid” quarterly figures, with Jefferies flagging some weakness in its Farmers division and Vontobel notes a miss on Solvency Elsewhere, the greenback remains on the front foot with the Bloomberg Dollar Spot Index rising 0.3% to its highest in over five weeks. Bunds and gilts are on the front foot with German and UK 10-year yields falling by 4bps and 3bps respectively. Earlier in the session, Asian stocks retreated as weaker-than-expected data from China continued to weigh on sentiment concerning the country’s economic growth outlook.  The MSCI Asia Pacific Index fell as much as 0.5%, with AIA Group, Meituan and Ping An Insurance Group the biggest drags. Shares in Hong Kong were the region’s worst performers after disappointing factory output and jobless data yesterday. Key gauges in Japan, Taiwan and South Korea rose.  The Hang Seng Index declined 2.1%, the most in a week, dragged lower by property and technology stocks. Tencent, which ended down 0.6%, saw large fund net outflow before its earnings report came after the market closed. Japanese stocks gained for a fourth day after a better-than-expected GDP report, with the Nikkei 225 closing above the 30,000 for the first time since September 2021 a day after the Topix closed at its highest level in more than three decades. The Topix Index rose 0.3% to 2,133.61, while the Nikkei advanced 0.8% to 30,093.59. Mitsubishi UFJ Financial Group Inc. contributed the most to the Topix Index gain, increasing 2.2%. Out of 2,159 stocks in the index, 900 rose and 1,161 fell, while 98 were unchanged. “It’s fascinating time to be looking at the Japanese equity market at the moment,” said Bruce Kirk, Chief Japan Equity Strategist at Goldman Sachs, on Bloomberg TV. “What we are seeing is a perfect alignment between the interests of the government, the regulator, the exchange, and also the investors, both foreign and domestic.”  Meanwhile commodity-heavy Australian stocks continued their decline, as the S&P/ASX 200 index fell 0.5% to close at 7,199.20, weighed by mining shares and banks.  Australian salaries rose at around half the pace of inflation in the first three months of 2023, suggesting the economy will avoid a wage-price spiral and bolstering the case for the central bank to stand pat in June. Read: Australia Pay Gains Suggest Economy to Avoid Wage Breakout In New Zealand, the S&P/NZX 50 index was little changed at 11,951.66 Stocks in India also dropped for a second session as investors continued to book profits after a recent rally in the key gauges. The S&P BSE Sensex fell 0.6% to 61,560.64 in Mumbai, while the NSE Nifty 50 Index posted a similar decline to close at 18,181.75. Stocks in the benchmark gauges are trading at 19.2 times their estimated earnings for the next 12 months, close to the 5-year average of 19.8x.  Infosys contributed the most to the index’s decline, decreasing 1.3%. Out of 30 shares in the Sensex index, 7 rose and 23 fell In FX, the Bloomberg Dollar Spot Index rose 0.3% to 1234.32 as the greenback rallied to a two-week high of 137.17 yen. In quiet trade, the dollar gained against all G10 currencies bar the New Zealand dollar, which rose as much as 0.4% to 0.6253. The yuan slid past the key level of 7 per dollar for the first time this year in a further sign the recovery of the world’s second- largest economy from its Covid restrictions is grinding to a halt; the offshore yuan slipped as much as 0.3% to 7.0201 per dollar, while the onshore currency dropped as much as 0.4% to 7.0026. In rates, treasuries are slightly richer across the curve with spreads broadly within 1bp-2bps of Tuesday’s close. 10-year yields are around 3.515%, richer by ~2bp on the day, with bunds and gilts outperforming by 3bp and 1.5bp in the sector. The two-year Treasury yield rose 2 basis points to 4.10%, after climbing as high as 4.12% on Tuesday; Treasuries remained pressured after Fed officials appeared divided on whether to raise rates or pause its tightening cycle. Traders are betting on the possibility that the Fed will keep rates on hold at 5.25% at its June meeting; they are pricing around 19 basis points in cuts in September, and a total of around 60 basis points of cuts by year-end. Bigger gains remain in core European rates after a strong 10-year German bond auction, which produced highest demand since August 2020. US session features 20-year bond sale at 1pm New York time.  For $15b 20- year bond auction, WI yield ~3.945% is 2.5bp cheaper than April’s stop-out, which tailed the WI by 0.2bp. IG issuance slate empty so far; Pfizer priced a $31b deal Tuesday, the 4th largest on record, while energy producer Ovintiv issued a $2.3b offering; Pfizer offered investors upwards of 20bps in new-issue concessions In commodities, crude futures decline with WTI down 0.2% to trade near $70.70. Spot gold falls 0.2% to around $1,985. Bitcoin drops 0.4%. UK MPs have warned that trading in Bitcoin and other speculative crypto assets should be regulated to prevent consumers from being lulled into a false sense of security about the risks posed, according to The Times. Looking to the day ahead now, data releases include US housing starts and building permits for April, along with the final CPI print for April from the Euro Area. From central banks, we’ll hear from BoE Governor Bailey, ECB Vice President de Guindos, along with the ECB’s de Cos, Elderson, Centeno and Rehn. Finally, earnings releases include Target and Cisco. Market Snapshot S&P 500 futures up 0.3% to 4,133.50 MXAP down 0.4% to 161.25 MXAPJ down 0.6% to 510.86 Nikkei up 0.8% to 30,093.59 Topix up 0.3% to 2,133.61 Hang Seng Index down 2.1% to 19,560.57 Shanghai Composite down 0.2% to 3,284.23 Sensex down 0.8% to 61,445.80 Australia S&P/ASX 200 down 0.5% to 7,199.24 Kospi up 0.6% to 2,494.66 STOXX Europe 600 down 0.1% to 464.11 German 10Y yield little changed at 2.33% Euro down 0.2% to $1.0843 Brent Futures down 0.3% to $74.67/bbl Gold spot down 0.1% to $1,986.63 U.S. Dollar Index up 0.28% to 102.85 Top Overnight News from Bloomberg Japan’s Q1 GDP comes in solidly above the Street consensus at +1.6% (the Street was modeling +0.8%) thanks to strong consumer spending. WSJ China’s new home prices for April comes in +0.32% M/M, down from the +0.44% number posted in March. WSJ UBS projects a massive accounting gain from its takeover of Credit Suisse, with the combined firms' "negative goodwill" seen boosting reported profit by $34.8 billion. On the downside, UBS estimates litigation, regulatory matters and related liabilities may take $4 billion out of capital over 12 months. BBG House Democrats plan to begin collecting signatures Wednesday for a discharge petition to raise the debt ceiling, a long-shot parliamentary maneuver designed to circumvent House Republican leadership and force a vote. WSJ US oil/gas drilling is starting to dip amid subdued prices, creating headwinds for the equipment industry (and potentially leading to higher energy prices down the board). FT The FTC’s lawsuit to block AMGN-HZNP is the first time in more than 10 years that the gov’t has tried to stop a drug merger (the FTC warned on Tues that “rampant consolidation” in the industry was pushing up prices). FT   Western Alliance provided some encouraging statistics around deposit dynamics. Overall deposits stabilized during the final days of March and have resumed a growth trajectory since. QTD deposit growth is north of $2B as of May 12. In addition, insured deposits are now nearly 80% of the total, while the company is making progress repositioning its balance sheet. RTRS TGT: Stock is down in the pre-market on the 2Q guide but our desk thinks they did what they needed to do with 1Q good enough and 2Q possible conservative (we’ll see more on that from the call).  2Q EPS of $2.05 vs Consensus $1.77 and EBITDA 12% better. Total sales were in-line, with comps of 0% (traffic was +0.9% vs Consensus +1% (bogey was for around a 0% to +0.5%, so this was about in-line and while nothing special, is no worse than feared).  Gross margins missed by 40 bps but SG&A beat by a sizeable 150 bps.   Guided 2Q EPS below at $1.30-$1.70 (Consensus $1.91) and comps of down low-singles (Consensus +0.2%). Encouragingly, inventory down 17% y/t vs -3% last quarter, reaffirming the FY guide, which could be considered a bit conservative after today’s beat (but early to say). H/T Scott Feiler Tesla's CEO Elon Musk said the electric-car maker will dabble in advertisements, a major shift for the company that’s largely avoided traditional marketing. “We’ll try a little advertising and see how it goes,” Musk said Tuesday at Tesla’s annual shareholder meeting, in response to an investor’s question. BBG A more detailed look at global markets courtesy of Newsquawk APAC stocks were mixed with the region cautious after the weak handover from the US where risk appetite was clouded amid debt ceiling concerns, while the meeting between US President Biden and congressional leaders achieved no major breakthroughs although was said to be productive and has set the stage to carry on further conversations. ASX 200 was subdued amid losses across nearly all sectors and following mixed wage price index data. Nikkei 225 outperformed and climbed above the 30,000 level for the first time since September 2021 with sentiment also underpinned by stronger-than-expected Japanese GDP data. Hang Seng and Shanghai Comp. were lower with price action contained amid a lack of fresh macro catalysts to detract from the recent streak of disappointing data releases from China. Top Asian News Chinese embassy spokesman said the visit to Taiwan by former UK PM Truss this week is a dangerous political show which will do nothing but harm to the UK, according to The Guardian. European bourses are in close proximity to the unchanged mark, Euro Stoxx 50 +0.1%, with fresh drivers somewhat limited and following a mixed APAC session though one that feature marked Nikkei 225 outperformance, above 30k. Within Europe, the DAX 40 +0.3% outperforms after heavyweight Siemens' (+2.0%) Q2 update alongside strength in SAP (+1.6%) following a guidance update and buyback announcement; in contrast, Financial Services are pressured by LSE and Euronext while Commerzbank is the Banking sector laggard. Stateside, futures are modestly firmer in generally horizontal trade with the ES +0.1% around 4130 ahead of debt  ceiling updates with the overnight developments slightly constructive but the impasse ultimately remains. Tencent (700 HK): Q1 2023 (CNY): Revenue 149.99bln (exp. 146.29nlm). Net 32.5bln (exp. 33.2bln), Operating 40.43bln (exp. 40.7bln); Weixin and Wechat MAUs 1.32bln (exp. 1.32bln). Top European News The Royal United Services Institute think tank warned that UK PM Sunak will have to find USD 42bln in tax hikes and spending cuts to pay for his pledge to boost defence spending to 2.5% of GDP, according to The Mirror. The Resolution Foundation has warned that the BoE's decision to hike interest rates could limit Chancellor Hunt's room to lower taxes in the Autumn, according to The Times. UK Labour opposition leader Keir Starmer calls for the UK's current Brexit deal to be renegotiated, but declares the UK must not re-join the EU or single market, according to Sky News. ECB's de Cos says the ECB is getting near the end of its tightening cycle; transmission remains strong. ECB's Rehn says need to see core CPI slow substantially. BoE Governor Bailey says "If there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required.". MPC pays particular attention to indicators of inflation persistence, including labour market tightness and wage growth, and services price inflation. There are signs that the labour market is loosening a little. FX DXY tops 103.000 amidst broad gains mainly forged at the expense of the Yuan. USD/CNY probes 7.0000 and USD/CNH approaches Fib at 7.0364 after a spate of disappointing Chinese data. Yen under 137.00 vs Dollar and relying on 200 DMA for a reprieve, Sterling sub-1.2450 and relatively unaffected by BoE's Bailey. Euro teeters above Fib in the low 1.0800 zone. PBoC set USD/CNY mid-point at 6.9748 vs exp. 6.9750 (prev. 6.9506). Fixed Income Firm bounce in core EU bonds and strong demand for supply along the way. Bunds and Gilts are both towards the top of ranges extending to 135.82 and 100.83 from 135.28 and 100.41 respectively. USTs relatively restrained with T-note tethered to 115-00 ahead of US housing data and USD 15bln 20-year sale. Commodities Crude benchmarks are essentially unchanged after drifting in the first half of the session as the USD picked up and sentiment slipped; a narrative that has eased/lifted from respective session peaks since. Currently, WTI and Brent are incrementally firmer within circa. USD 1/bbl parameters with specific newsflow light and focus on geopols. amid reports that Iran's Economy Minister discussed oil and gas projects with Saudi Arabia, according to Bloomberg. Spot gold is drifting with the USD firmer and sentiment improving throughout the morning, yellow metal below USD 2k/oz and approaching the USD 1981/oz 50-DMA. Base metals are more mixed, with the region attempting to recoup some of the recent China-induced pressures but with action capped on USD strength. US Energy Inventory Data (bbls): Crude +3.7mln (exp. -0.9mln), Gasoline -2.5mln (exp. -1.1mln), Distillate -0.9mln (exp. +0.1mln), Cushing +2.9mln. UBS lowers Year-End Brent forecast by USD 10/bbl to USD 95/bbl amid greater-than-expected supply. Debt Ceiling latest US President Biden said they had a good, productive meeting on the debt ceiling and there is still more work to do, while he made it clear to House Speaker McCarthy that they will talk regularly over the next several days. Biden is confident they will continue to make progress on avoiding default and said that defaulting on debt is not an option, while he also noted it is disappointing Republicans refuse to consider raising revenue, according to Reuters. White House said President Biden directed staff to meet daily on outstanding issues and said he would like to check in with leaders later this week by phone and meet with them upon return from overseas. Biden also emphasised that while more work remains on a range of difficult issues, he is optimistic that there is a path to a budget agreement, according to Reuters. President Biden will no longer visit Australia or Papua New Guinea and will return to the US on Sunday to focus on the debt ceiling talks, according to NBC. US House Speaker McCarthy said they have set the stage to carry on conversations in debt talks and that President Biden agreed to appoint a couple of people from the administration to negotiate directly with his team. McCarthy also said there is a lot of work to do in a short amount of time and that they are still very far apart but added it is possible to get a deal by the end of the week and it is not that difficult to reach an agreement. However, McCarthy later said he is not more optimistic about getting a deal by the end of the week. US Senate Majority Leader Schumer said the debt meeting was good and productive, while he added that they all agreed a default is a horrible option, according to Reuters. US Senate Republican Leader McConnell earlier told Senate Republicans there had not been much progress on debt ceilings talks with POTUS and other leaders. House Democrats are to reportedly begin collecting signatures for effort to raise debt ceiling, according to WSJ. Punchbowl on the US debt limit, says "Initial discussions began Tuesday night, with full-scale negotiations set to kick off this morning, we’re told", "Sources close to the talks expect any debt-limit boost to run well into 2025." Geopolitics Russia's Kremlin says it will not enter a hypothetical discussion on what Russia will do if the grain deal lapses. DB's Jim Reid concludes the overnight wrap Yesterday Henry and I published a chartbook entitled "A Time Capsule for the Future". It imagines how those in the distant future might look at what the macro signals were telling us now in May 2023. Would it be obvious in hindsight as to what happened next? For us, this has been the most predictable US cycle of our careers from the moment the US money supply exploded. From then it wasn’t difficult to predict we’d get very high inflation, and from then that central banks would have to hike rates aggressively. The next stage continues to look clear to us: given aggressive rate hikes and curve inversions, we think there’ll be a US recession rather than a soft landing. Indeed, just about every leading indicator is now pointing to one. Does it look as obvious to you? Will future historians digging up this time capsule say the same thing? Or what are we not seeing that might prove us wrong? We'd be interested in hearing your views, especially those of you from the future! The presentation is here and tomorrow we'll be hosting a webinar on it at 2:30pm London time. Please Register Here if you want to view. Markets had a slightly tough session yesterday, as robust data and hawkish comments from Fed officials helped drive a selloff across bonds (mostly) and equities (a bit). Having said that the market was really waiting for the results of the latest meeting on the debt ceiling between President Biden and congressional leaders starting an hour before the US close. House Speaker McCarthy continues to say the two sides remain far apart. However, he acknowledged that “it is possible to get a deal by the end of the week” despite there being a lot of work to do. He also noted that the talks were “more productive” than previous meetings and that a smaller group of staffers from both sides are working toward a deal, with talks commencing as soon as tonight. President Biden announced that there was “consensus, I think, among the congressional leaders that defaulting on the debt is simply not an option.” Senate leadership from both parties exhibited optimism that a deal could be reached as well. Before the meeting even started there was news that President Biden was going to shorten his upcoming trip to Asia and return to Washington on Sunday after the G-7 meeting in Japan. This highlights the seriousness around Treasury Secretary Yellen’s June 1st deadline. Ahead of the meeting, Treasuries had already been hurt by a collection of strong data releases, which knocked hopes among investors that rates would be cut later this year. For instance, retail sales (excluding auto and gas) were up by +0.6% in April (vs. +0.2% expected) following two consecutive monthly declines. Then industrial production grew by +0.5% in April (vs. unch expected), whilst the NAHB’s housing market index rose for a 5th month running to 50 (vs. 45 expected). With those releases in hand and the hawkish Fed-speak discussed below, investors grew more doubtful that the Fed would pivot towards rate cuts this year, and the rate priced in for the December meeting was up +7.4bps on the day to 4.484%. In turn, that helped spur a rise in Treasury yields across the curve, with the 10yr yield up +3.2bps to 3.534% and 2yr yields +7.2bps higher. Meanwhile the 30yr yield was up +1.2bps at 3.854%, marking its highest level since March 8, just before SVB’s collapse led to market turmoil. Having said that yields are 1-2bps lower across the curve in Asia. Before the slight rally back in Asia, the losses for Treasuries were given added support from various Fed speakers, whose tone was generally on the hawkish side. First, we had Cleveland Fed President Mester, who said that rates weren’t sufficiently restrictive just yet, and that “given how stubborn inflation has been, I can’t say that I’m at a level of the fed funds rate where it’s equally probably that the next move could be an increase or a decrease”. Later on, Richmond Fed President Barkin said that “if more increases are what’s necessary” to reduce inflation then he was “comfortable doing that.” New York Fed President Williams said the committee was still waiting for the long lags of monetary policy while also noting that inflation is still “too high”. He did say that he sees supply-demand imbalances improving throughout the economy. Chicago Fed President Goolsbee reminded the market that service inflation remains too high and that “its far too premature to be talking about rate cuts.” Lastly, Dallas Fed President Logan tried to walk the line between the hawks and doves saying that gradual policy adjustment can help mitigate stability risks and that justifies the Fed slowing the pace of hikes or outright pausing. This combination of news meant that equities struggled yesterday, with the S&P 500 (-0.64%) reversing its gains from the previous session and close near its lows on the day. The declines were generally broad-based (88% of the index lower), but tech stocks were the exception and saw the NASDAQ outperform slightly (-0.18%) . That was aided by a strong advance from the megacap stocks, with the FANG+ index rising +0.97% yesterday in a big outperformance. The latest moves further showcase just show top-heavy the equity gains have been this year. Indeed, the S&P 500 is up by +7.04% on a YTD basis, but the equal-weighted S&P 500 is now down -0.80% since the start of the year. Back in Europe, markets followed a broadly similar pattern to the US, with the STOXX 600 down -0.42%, whilst yields on 10yr bunds (+4.4bps), OATs (+5.1bps) and BTPs (+3.5bps) all moved higher. Sentiment wasn’t helped by the latest ZEW survey from Germany, where the expectations component fell for a 3rd consecutive month in May to -10.7 (vs. -5.0 expected), so further reversing the more positive sentiment we saw around the turn of the year. On the other hand, there was some further good news from natural gas prices, which fell -1.53% to another 22-month low of €31.82/MWh. Elsewhere, UK gilts were an outperformer yesterday following signs that the labour market might be softening. In particular, the number of payrolled employees unexpectedly fell by -136k in April (vs. +25k expected), which marked the first monthly decline in that measure since February 2021. Furthermore, the unemployment rate over the three months to March rose a tenth to 3.9% (vs. 3.8% expected). See our economist's view on the data here. The release meant investors slightly downgraded the likelihood of a rate hike at the BoE’s next meeting in June, with the chances down to 78%, having been at 85% the previous day. It was the reverse story in Canada, with 10yr yields up by +17bps after the country’s CPI reading unexpectedly rose in April. That showed inflation rising to +4.4% (vs. +4.1% expected), which ended a run of 5 consecutive monthly declines in headline inflation. In turn, investors dialled up the chances that the Bank of Canada might hike rates at the next meeting following their recent pause, with overnight index swaps now seeing a 35% chance of another 25bp move in June. Asian equity markets are mixed this morning as US debt negotiations continue. Across the region, the Nikkei (+0.66%) is topping gains, moving beyond the 30,000 level for the first time since September 2021, as Japan’s Q1 GDP beat estimates (more below) while the KOSPI (+0.56%) is also trading up. Elsewhere, Chinese stocks are losing ground this morning with the Hang Seng (-0.48%), the CSI (-0.35%) and the Shanghai Composite (-0.24%) all edging lower. Outside of Asia, US stock futures are printing mild gains with those on the S&P 500 (+0.19%) and NASDAQ 100 (+0.25%) retracing some of yesterday's losses. Coming back to Japan, data showed that the economy grew +1.6% in the first quarter this year on an annualized basis (v/s +0.8% expected), recording the first increase in three quarters and following a revised -0.1% fall in Q4 last year (initially +0.1%). A strong rebound in service activity after reopening post pandemic was the main driver of growth. To the day ahead now, and data releases include US housing starts and building permits for April, along with the final CPI print for April from the Euro Area. From central banks, we’ll hear from BoE Governor Bailey, ECB Vice President de Guindos, along with the ECB’s de Cos, Elderson, Centeno and Rehn. Finally, earnings releases include Target and Cisco. Tyler Durden Wed, 05/17/2023 - 08:13.....»»

The South African Rand took a nosedive, hitting an all-time low following allegations by the United States that South Africa ... Read more The South African Rand took a nosedive, hitting an all-time low following allegations by the United States that South Africa is covertly supplying weapons to Russia. This shocking revelation has sparked a significant foreign policy crisis for President Cyril Ramaphosa as he grapples with South Africa’s connections to the Kremlin and the country’s stance on the Ukraine conflict. Reuben Brigety, the US ambassador to South Africa, reportedly claimed that the US has grounds to believe that arms and ammunition were loaded onto a sanctioned Russian vessel, the Lady R, which docked at the Simon’s Town naval dockyard near Cape Town in December. South African Rand And Markets Weaken These allegations are yet to be confirmed but have already sent shockwaves through South African markets. The benchmark stock index fell 1%, and yields on 2032 government bonds skyrocketed to their highest level since the pandemic began. “Among the things we noted was the docking of the cargo ship… which we are confident uploaded weapons and ammunition onto that vessel in Simon’s Town as it made its way back to Russia,” Brigety stated. He further emphasized the severity of the situation, explaining, “The arming of the Russians is extremely serious, and we do not consider this issue to be resolved.” South Africa has previously claimed a non-aligned stance in the Ukraine war. However, there are indications that Ramaphosa’s administration, like many non-western nations, leans towards Russia. Evidence includes the joint naval exercises this year and Ramaphosa’s invitation to Russian president Vladimir Putin to attend a Brics leaders’ summit in Johannesburg in August. The latter move backfired spectacularly after the International Criminal Court (ICC) indicted Putin for war crimes. As an ICC member, South Africa would be legally obliged to arrest Putin should he travel there. The Lady R incident is likely to cast a long shadow over these matters. Owned by Transmorflot, a company placed under sanctions by the US last year, the Lady R apparently switched off its transponder during its stop in Cape Town. While the South African defense minister confirmed the ship had delivered a consignment for the country’s defense forces, there were no details on what the vessel may have picked up. In January, the South African government officially denied approving any arms sales to Russia since Moscow began its full-scale invasion of Ukraine in February last year. However, these recent allegations by the US and their consequential impact on the South African Rand highlight the precarious position South Africa finds itself in on the global stage. The incident underscores the need for clarity and transparency in the country’s international relations, particularly in these tumultuous times. Conclusion In conclusion, the allegation of South Africa’s involvement in supplying weapons to Russia amidst the ongoing Ukraine conflict is likely to strain the country’s diplomatic relationships and further destabilize its already struggling economy. This episode presents a stern test for President Ramaphosa’s administration, which must manage the crisis effectively to maintain international alliances and secure the nation’s economic stability. The unfolding events underscore the importance of South Africa’s stance in the global political landscape and the potential repercussions of their foreign policy decisions. Ultimately, how this situation resolves could have far-reaching impacts on South Africa’s future and its position in the global economy. What could be the potential economic and diplomatic consequences for South Africa following the allegations of supplying arms to Russia, and how might this situation influence the country’s foreign policy decisions in the future? Today in precious metals, gold prices fell 0.69% to $2,015.36 per ounce. Silver dropped 4.76% to $24.17 per ounce. Platinum decreased by 1.54% to $1,089.00 per ounce, while Palladium dipped by 3.42% to $1,551.00 per ounce. Bitcoin sunk 1.56% to $27,186.08......»»

Rand Plummets To Record Low After US Accuses South Africa Of Supplying Weapons To Russia The US ambassador to Pretoria accused South Africa of supplying arms to Russia in a covert naval operation, sharply escalating a foreign policy crisis for President Cyril Ramaphosa over the country’s ties to the Kremlin and its position on the Ukraine war. While the accusation was unconfirmed as of Thursday morning, the news sent the South African rand plunging to a new all time low while the benchmark stock index slid 1% and yields on 2032 government bonds soared 30 basis points to the highest since the start of the pandemic as any evidence that he country is defying international sanctions to support Russia’s invasion of Ukraine would make South Africa itself subject to international repercussions that would further sink an economy already under strain from unprecedented power shortages According to the FT, Reuben Brigety, US ambassador to South Africa, told local media on Thursday the US believed that weapons and ammunition was loaded onto the Lady R, a sanctioned Russian vessel that docked in the Simon’s Town naval dockyard near Cape Town in December. Lady R ship. Source: MarineTraffic “Among the things we noted was the docking of the cargo ship… which we are confident uploaded weapons and ammunition onto that vessel in Simon’s Town as it made its way back to Russia,” he said, in comments reported by South Africa’s News24. “The arming of the Russians is extremely serious, and we do not consider this issue to be resolved,” he added. The US embassy and South Africa’s foreign ministry did not immediately respond to requests for comment. Ramaphosa’s office said it would respond “in due course”. South Africa has said it is non-aligned in the war, but Ramaphosa’s government is already under pressure over signs it - along with most non-western nations - is favoring Russia, for example by holding joint naval exercises this year. Ramaphosa has also extended an invitation for Russian president Vladimir Putin to attend a Brics leaders’ summit in Johannesburg in August - a move that has backfired on Pretoria after the International Criminal Court indicted Putin for war crimes. South Africa, a member of the ICC, would be legally obliged to arrest Putin if he travels there. Sydney Mufamadi, Ramaphosa’s national security adviser, recently visited the US to explain South Africa’s stance and to try to preserve trade links. According to the FT, the scandal over the Lady R is now likely to overshadow these efforts. Owned by Transmorflot, a company placed under sanctions by the US last year, the Lady R appeared to switch off its transponder as it made the stop in Cape Town after a voyage down the west coast of Africa. After the ship left port, South Africa’s defence minister said it had delivered a consignment for the country’s defense forces, but provided no details on what the ship may have picked up in Cape Town. The South African government in January officially denied that it had approved any arms sales from South Africa to Russia since Moscow began its full-scale invasion of Ukraine in February last year. Tyler Durden Thu, 05/11/2023 - 12:20.....»»