“Money drain: Fears are rising that the global financial system will seize up. The volatility in global bond, equity, currency and property markets could trigger – or be triggering – margin calls that flow back to the bond markets.
“The liquidity issues in bond markets that traders are complaining about – and the demonstration provided by the UK experience – point to markets, and financial systems, that are fragile and vulnerable.
“The Fed and other central banks’ aspirations for a smooth reversal from QE to QT to combat raging inflation rates may not, as the BoE discovered so brutally, be as easy to execute as they hoped or planned.”
“Global bonds move in lockstep, ramping up investors’ risk.
“Government bond prices around the world are moving in tandem, reducing investors’ ability to diversify their portfolios and raising concerns of being blindsided by market gyrations… Increasingly, that means investors holding the debt of one country can see their portfolios slammed by market activity at the other end of the globe.”
“Why the UK bond crisis could be just the start… The IMF is warning about potential liquidity risks in the world’s $64 trillion of managed funds…
““Pressures from these investor runs could force funds to sell assets quickly, which would further depress valuations. That in turn would amplify the impact of the initial shock and potentially undermine the stability of the financial system,” the IMF authors write.”
“‘Swimming naked’: Credit Suisse is not the only financial giant facing trouble…
“Rates are rising rapidly and liquidity in financial markets is shrinking. As that tide of cheap liquidity goes out, to borrow from one of Warren Buffett’s more colourful and popular lines, Credit Suisse won’t be the only big institution found to have been “swimming naked”.”
“‘This debate to some extent is over.’ Major economies are already in a global recession, Morgan Stanley strategist says…
“Jonathan Garner, chief Asia and emerging market strategist at Morgan Stanley argues that recession chances are already assured in China, Europe, and the U.S., and the remaining questions are about when economic contractions will start, and how bad they will be.”
https://fortune.com/2022/10/10/global-recession-already-hitting-major-economies-morgan-stanley/
“Global economy contracts for second month running amid tightening financial conditions…
“Manufacturing is being hit by rising prices, weakened demand and slumping trade… In the service sector, consumer focused firms are likewise suffering falling demand due to the cost-of-living crisis. However, rising interest rates are also driving an increasingly severe downturn in financial services, led by a slump in real estate activity.”
“Worldwide PC Shipments Plunge Nearly 20%, Steepest Drop in More Than 20 Years…
““This quarter’s results could mark a historic slowdown for the PC market,” said Mikako Kitagawa, an analyst at Gartner. “While supply chain disruptions have finally eased, high inventory has now become a major issue given weak PC demand in both the consumer and business markets.””
“Cutting oil output risks global economy, warns US Treasury secretary.
“The world’s biggest oil-producing nations cutting production at a time of soaring energy costs is “unhelpful and unwise” for global economic growth, the US Treasury secretary has warned, amid intense pressure from sky-high inflation… Her warning comes ahead of sharp downgrades for global growth expected from the International Monetary Fund this week.”
“Kwarteng Told He Needs to Find £60 Billion of UK Spending Cuts.
“Britain is facing calls to slash public spending by an amount twice as big as the annual defense budget to stabilize the public finances and halt a snowballing market rout… The yield on inflation-linked debt rose by the most in at least three decades on Monday.”
“‘Material risk’ to UK financial stability continues, Bank of England warns.
“The Bank of England has warned of “a material risk to UK financial stability” and “dysfunction” in part of the pension market despite its unprecedented intervention late last month. It comes after the cost of government borrowing continued to rise yesterday.”
“UK Shoppers Snap Up Blankets, Warm Clothes for Difficult Winter.
“Britons took action to curtail their energy use this winter by buying blankets, warm clothing and energy-efficient appliances in response to soaring gas and electricity prices. That’s according to the latest sales survey from the British Retail Consortium.”
“Third of petrol stations out of fuel in France as strikes continue…
“The industrial action has disrupted refining and delivery and comes as workers across Europe demand higher salaries to cope with surging inflation and a cost-of-living crisis. French President Emmanuel Macron, whose government is under mounting pressure to act as the strike grinds on and more fuel stations run out of some products, called for a quick end to the crisis.”
“Germany to pay December gas bills for households and businesses.
“The German state is to pay this December’s monthly gas bill for all households and small- to medium-sized businesses, according to a phased two-stage cap on energy prices recommended by a government-appointed expert panel on Monday.”
“German bond yields jump after Scholz reported to support joint EU debt…
““More fiscal stimulus will mean more inflationary risks and possibly further rate hikes,” Antoine Bouvet, senior rate strategist at ING, said. By 1519 GMT Germany’s 10-year yield, the euro area’s benchmark, was up 15 bps at 2.346%, after hitting a fresh 11-year high at 2.353%.”
“European Energy Market Spooked By $1.5 Trillion Liquidity Crisis.
“As Europe continues to grapple with a daunting energy crisis, European energy markets still face a liquidity disaster, with financial institution exposure to fossil fuels and record levels of margin calls sounding the alarm bells… Aside from fanning inflation, the energy crisis is sucking up capital to guarantee trades amid wild price swings.”
“Russian gas supply gap casts chill in Europe as winter nears.
“Europe needs to pay up to import liquefied natural gas, pray for a mild winter and cut energy demand as any sabotage of infrastructure or even deeper cuts to Russian supply would make power rationing or blackouts all but inevitable.”
“Investor morale in the euro zone slid for the third consecutive month in October to its lowest level since May 2020 signalling a deep recession for the 19-country currency bloc, a survey showed Monday.
“Sentix’s index for the euro zone tumbled to -38.3 points in October from -31.8 in September, below expectations of analysts polled by Reuters for a reading of -34.7.”
https://www.euronews.com/next/2022/10/10/eurozone-economy-businesssentiment
“Several protests against rising prices and the oppressive cost of living were held in some of the major capital cities of the EU.
“Since the beginning of the Russia-Ukraine war, the EU sought to contain Russia through the imposition of various sanctionary and punitive mechanisms. But due to the EU’s overreliance on Russian gas, anti-Moscow sanctions have caused more damage to EU citizens than they did to Russia.”
“China Job Market Prospects Drop to Record Low as Economy Weakens.
“Chinese residents are experiencing the worst job market prospects on record amid a sharp slowdown in the economy, a worrying sign for officials as the Communist Party prepares to hold a key political meeting next week.”
“Emerging Markets Already in Crisis Situation, Deutsche Bank Says in Report…
““It is reasonable to say that a crisis has already arrived,” the analysts led by Chief Economist Michael Spencer wrote in the report. “While most of the stress so far has been in frontier markets, the pressure has been broad-based and felt in both offshore and local currency markets.””
“Bangladesh electricity crisis deepens as demand-supply gap widens.
“Instability in the global energy market and a rise in import cost due to a dollar price hike brought back rolling blackouts to Bangladesh in mid-2022 and the government hoped the situation would improve by the end of September, but it has rather worsened into the second week of October.”
“Taps run dry in Dhaka as recurring power cuts cripple water supply.
“… the revival of the dreaded load-shedding regime, borne out of an escalating energy crisis globally, has had a crippling effect on the water supply to large swathes of the city, hampering daily chores such as cooking, cleaning and bathing.”
https://bdnews24.com/bangladesh/l75zccvmms
“Protests against Tehran regime spread to vital energy industry…
“Workers at Abadan and Kangan oil refineries and the Bushehr petrochemical plant joined in the demonstrations that have been sweeping Iran. Video footage online showed dozens of workers blocking the road to the Bushehr plant in Assaluyeh on the Gulf coast, chanting “Death to the dictator.””
https://www.arabnews.com/node/2178926/middle-east
“Egypt Inflation Quickens Again, With Risks Ahead from Pound…
“Stubbornly high inflation faces further risks from a weaker domestic currency, which added to shocks after Russia’s invasion of Ukraine stoked the costs of commodities. Egypt’s government has signaled it accepts a looser exchange rate as it negotiates a deal with the International Monetary Fund.”
“Tunisia has only one week of petrol supply, Union official says.
“Tunisia only has enough petrol to last a week, a senior official in the Labour Union said on Monday… Long lines of cars have jammed roads as they wait to fill their tanks around Tunis over recent days, in what critics of the government see as another sign of an unfolding crisis in public finances.”
“South Africa risks economic ‘collapse’ as Transnet strike hits ports with billions on the line: business.
“…logistics businesses have warned of a catastrophic economic fallout if operations at the state-owned logistics giant’s ports in Durban and Cape Town face prolonged suspension… Mavuso said a strike at Transnet was “disastrous” not only to direct imports like the medical sector, and exports, like the mining sector but to the entire, interconnected economy.”
“CEO of Barrick Gold raises concern about viability of Argentina’s mining industry…
““At Veladero, we have observed how the current financial situation in Argentina, with currency restrictions, inflation, and taxation, combines with the global financial crisis to create risks for the mine plan.” …The South American nation is on pace to hold the world’s highest inflation rate among major economies…”
“Argentina’s replaces three ministers amid economic crisis, puts more women in power.
“Argentine President Alberto Fernandez on Monday again reshuffled his Cabinet and appointed three women to lead the labor, social development and women’s ministries, as a deep economic crisis has sparked weeks of protests.”
“In Haiti, factories close, school feedings are on hold and hunger is about to get worse…
“In a country where millions are already on the verge of starvation, the looting and pillaging of food warehouses belonging to the Haitian government, the United Nations, charity groups, supermarkets, schools and businesses during the recent and often violent anti-government protests risk plunging Haiti deeper into despair.”
https://www.miamiherald.com/news/nation-world/world/americas/haiti/article266648636.html
“U.N. refugee boss warns of ‘severe cuts’ without immediate new funding.
“The U.N. refugee agency will have to make “severe cuts” unless it gets extra funding soon, its chief said on Monday, warning cuts could lead to more malnutrition and child marriages as well as unrest in some of the world’s poorest regions.”
You can read the previous “Economic” thread here. I’ll be back tomorrow with a “Climate” thread.
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