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Fraying central bank consensus spurs dollar and market stress.

“The highest inflation in decades is unraveling whatever policy consensus there was between the world’s major central banks since the Great Financial Crisis and global markets could buckle under resulting waves of stress and volatility.”

https://www.reuters.com/markets/europe/fraying-central-bank-consensus-spurs-dollar-market-stress-2022-05-04/


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Federal Reserve announces biggest interest rate hike since 2000.

More rate rises are expected. The Economist Intelligence Unit expects the Fed to raise rates seven times in 2022, reaching 2.9% in early 2023. Starting in June, officials also plan to shrink their $9tn asset portfolio, a policy move that will further push up borrowing costs.”

https://www.theguardian.com/business/2022/may/04/fed-rate-increase-inflation


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“…The Fed Can’t Fix Our Broken Banking System… the Fed tells us it can reverse course and unwind the emergency measures it first launched back in 2008… Unfortunately, given the underlying structure of our financial system today, the Fed is not likely to get very far…

If legislators do not act soon, another 2008-level crisis (or worse) will eventually force their hand. When that happens, the economic, political, and social costs could be catastrophic.

https://time.com/6173486/federal-reserve-broken-banking-system/


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Distressed debt levels double in US corporate bond market.

“Investors have started backing away from the riskiest corporate bonds in the US, with the amount of debt that trades at distressed levels doubling since the start of the year… Further monetary tightening by the Fed will push more debt into the distressed zone.

https://www.ft.com/content/4153d2e3-af2b-43f3-b346-c83df0cdb690


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The Hot Housing Market Makes the Fed’s Inflation-Fighting Job Even Tougher.

“Federal Reserve officials are counting on higher mortgage rates to throw cold water on the frenzied housing market as they work to tame the highest inflation in decades. But the market may not cool fast enough.”

https://www.bloomberg.com/news/articles/2022-05-03/housing-market-prices-rise-worsen-inflation-dilemma


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U.S. natural gas surged Tuesday to the highest level in nearly 14 years as Russia’s invasion of Ukraine wreaks havoc on global energy markets.

“Henry Hub prices jumped more than 9% at one point to a session high of $8.169 per million British thermal units (MMBtu) during morning trading on Wall Street, the highest level since September 2008.”

https://www.cnbc.com/2022/05/03/natural-gas-surges-9percent-to-highest-level-since-2008-as-russias-war-roils-energy-markets.html


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Diesel prices hit yet another new record on Wednesday at $5.43 per gallon, now some $1.2 more than a gallon of gasoline, according to AAA.

“While high prices at that pump for gasoline have somewhat leveled off, diesel continues to steadily rise, causing an increase in prices of consumer goods because it fuels the trucks that transport an estimated 70% of consumer goods freighted in the United States.”

https://oilprice.com/Latest-Energy-News/World-News/Diesel-Prices-Hit-New-Record-On-Wednesday.html


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The U.S. Shale Patch Is Facing A Plethora Of Problems.

“… the rig count is going steadily higher, but production from the eight major shale basins has leveled off and, as of Feb, 22, has actually slightly declined. If the May edition of the DPR confirms this trend then there is going to have to be a drastic reevaluation of what will be expected from shale in the future.”

https://oilprice.com/Energy/Energy-General/The-US-Shale-Patch-Is-Facing-A-Plethora-Of-Problems.html


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U.S. Offshore Oil Boom Is No Cure For Global Supply Crunch.

“According to Bloomberg, a new wave of oil platforms is sweeping across the U.S. Gulf of Mexico as oil companies rush to capitalize on oil prices at multi-year highs. The bad news: A ramp-up in U.S. offshore output is not likely to close the global oil supply gap thanks to years of underinvestment.”

https://oilprice.com/Energy/Crude-Oil/US-Offshore-Oil-Boom-Is-No-Cure-For-Global-Supply-Crunch.html


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OPEC Has Missed Its Oil Output Target Once Again.

“Force majeure in Libya and under-production in Nigeria have led to a much lower increase in OPEC production for the month of April than was called for by the cartel’s supply agreement.”

https://oilprice.com/Latest-Energy-News/World-News/Production-Declines-in-Libya-And-Nigeria-Are-Hindered-OPECs-April-Oil-Output.html


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The oil market could lose as much as 2 million barrels a day of Russian crude in coming weeks, when the hit from existing sanctions becomes apparent, BP’s chief executive has said…

“Looney added BP doesn’t expect any “let off” in oil prices and market volatility soon, given the drop in volumes reaching the market.”

https://markets.businessinsider.com/news/commodities/russia-oil-crude-supply-shock-bp-eu-ban-ukraine-sanctions-2022-5


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Germany Says Ready to Halt Russian Oil After EU Agrees Embargo…

“Economy Minister Robert Habeck… said the main challenge is a refinery in Schwedt near the Polish borders, which is operated by Russia’s Rosneft PJSC and has little incentive to switch suppliers. Germany is preparing legislation that could pave the way for it taking control of the facility.”

https://www.bloomberg.com/news/articles/2022-05-04/germany-says-ready-to-halt-russian-oil-after-eu-agrees-embargo


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Swiss preparing for possible ‘severe’ electricity and gas shortages.

“The Swiss government is setting up a gas sector crisis intervention group and a monitoring system for early detection of an impending electricity shortage, it said on Wednesday, as it prepares for the possibility of “severe” power shortages.”

https://www.reuters.com/world/europe/swiss-preparing-possible-severe-electricity-gas-shortages-2022-05-04/


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Covid lockdowns hammer China’s services sector…

“The Caixin China services purchasing managers’ index, which asks companies whether they experienced an increase or decrease in business activity compared with the previous month, fell to 36.2 in April from 42 in March, the second-sharpest fall since the survey was launched in 2005.”

https://www.ft.com/content/71b7fa2f-1158-4e4c-b6cd-b0ab309593a6


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Mexico to boost output of staple foods in plan to curb inflation.

“Mexico will increase production of staple foods such as corn, rice and beans as part of a plan agreed with business leaders to control consumer price inflation which is at a two-decade high, Finance Minister Rogelio Ramirez de la O said on Wednesday.”

https://www.reuters.com/world/americas/mexico-boost-output-staple-foods-plan-curb-inflation-2022-05-04/


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Ghana at Risk of Debt Default, Main Opposition Leader Warns… Debt servicing costs have risen 500% from 2017, Mahama Says

““More than half of what government collects in taxes is used to service debt, with the remainder going almost exclusively into public-sector wages,” Mahama said. “The effect of this, is that government is unable to meet its spending obligations in the most critical sectors of the economy…”

https://www.bloomberg.com/news/articles/2022-05-03/ghana-at-risk-of-debt-default-main-opposition-leader-warns


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Blackouts force Syrians to return to old ways to keep lights on…

“Syrians, who are experiencing their worst bout of economic hardship since their country was ravaged with war more than a decade ago, have been increasingly relying on vintage kits and old ways to cope with fuel shortage and long hours of electricity outages.”

https://www.aljazeera.com/features/2022/5/3/blackouts-force-syrians-return-old-ways-keep-lights-on


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Turkey’s farmers battle with soaring costs and mounting debt.

“…those who work the land today are struggling, like many of the half a million farmers across Turkey. A collapse in the value of the Turkish lira over the past 12 months has combined with a surge in global commodity prices to vastly increase their input costs.”

https://www.ft.com/content/f86c314d-cd73-4a4b-aceb-425c87fc76c6


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A debt typhoon is set to engulf the world, and India won’t escape unscathed…

“Today, Indians are indignant at soaring prices of petrol and diesel. Opposition parties demand further duty cuts by the central government while the prime minister wants the states to cut their fuel taxes. Neither side dares broadcast the bad news that even today’s prices are unsustainably low and will soar much higher.”

https://economictimes.indiatimes.com/opinion/et-commentary/a-debt-typhoon-is-set-to-engulf-the-world-and-india-wont-escape-unscathed/articleshow/91294496.cms


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India Mulls Wheat Export Curbs in Latest Food Supply Squeeze.

“India is considering restricting wheat exports as severe heat waves have damaged crops, exacerbating tight global supplies after the war in Ukraine sent food inflation soaring… The South Asian nation experienced its hottest March on record, shriveling the wheat crop…”

https://www.bloomberg.com/news/articles/2022-05-04/india-considers-restricting-wheat-exports-as-heat-destroys-crops


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Top Fertilizer Maker Nutrien Sees Market Chaos Beyond 2022.

“Fertilizer prices have soared to all-time highs as Russia’s invasion of Ukraine and sanctions on Belarus have thrown a massive chunk of the world’s supply into disarray. The sanctions have the potential to create more long-lasting impacts…”

https://www.bloomberg.com/news/articles/2022-05-03/top-fertilizer-maker-nutrien-sees-market-chaos-beyond-2022


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World Hunger to Worsen After Spiking 25% Before Ukraine War…

“Almost 193 million people across 53 countries or territories suffered acute food insecurity in 2021, meaning their lack of meals posed an immediate threat to their lives or livelihoods, the international alliance said in a report. That’s up from 155 million in 55 countries for the prior year…”

https://www.bloomberg.com/news/articles/2022-05-04/world-hunger-spiked-before-ukraine-war-and-will-likely-get-worse


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Worldwide factory output falls for first time since June 2020 as supply conditions worsen…

“…China’s downturn, combined with disruptions caused by the Ukraine war, also led to a worsening global supply situation, which in turn pushed price pressures higher and led to a further drop in global business expectations for output in the year ahead.”

https://ihsmarkit.com/research-analysis/worldwide-factory-output-falls-for-first-time-since-june-2020-as-supply-conditions-worsen-may22.html


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Global chemicals face negative growth on inflation, more logistics problems and a deep downturn in China…

“Inflation is also at levels that we haven’t seen since the 1970s. Even if supply is available of durable, non-essential goods made from chemicals and polymers (most finished goods are of course made in China), demand may well collapse because of rising costs. Or the collapse may have already started.”

https://www.icis.com/asian-chemical-connections/2022/05/global-chemicals-face-negative-growth-on-inflation-more-logistics-problems-and-a-deep-china-downturn/


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Deloitte: Stagflation shock coming for global economy.

“Many other central banks around the world have already commenced lifting their official rates to stem inflationary pressures, and they are doing so at a tricky time because expectations around economic growth are weakening.”

https://www.macrobusiness.com.au/2022/05/deloitte-stagflation-shock-coming-for-global-economy/


You can read the previous ‘Economic’ thread here. I’ll be back tomorrow with a ‘Climate’ thread.

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