Thank you all for bearing with me in my absence; my batteries needed a recharge, and a huge thank you to Kali and team for holding the fort so diligently in my absence. On to today’s thread:
[picture is of UK Chancellor, Jeremy Hunt].“Government borrowing costs soared around the world yesterday as mounting concerns over the global economy wreaked havoc on the bond markets
“As investors fretted over persistent inflation and ‘higher for longer’ interest rates, bond yields rose in the United States, Britain and across Europe. That threatens to push up borrowing costs for households and businesses – further denting the economy.”
“Collateral damage and the mounting risk of a global ‘Liz Truss’ accident. A perfect storm is emerging in America’s turbulent bond market…
“Yields on 10-year Treasuries – the anchor price of world money – have risen by 120 basis points since mid-May, touching a 15-year high of 4.7pc this week. This is a greater credit shock than the stress that triggered the collapse of Silicon Valley Bank and its regional peers in February.”
“Extreme fear is haunting markets again. Here’s why investors are running scared.
“CNN’s Fear and Greed Index, which tracks seven indicators of market sentiment in the United States, tipped into “extreme fear” Thursday for the first time since March, when a banking crisis was sowing panic among investors.”
“Moody’s warns of ‘systemic risk’ from leveraged lending market…
“Credit rating agency Moody’s has warned of a “race to the bottom” between banks and private credit funds financing risky leveraged buyouts, a contest it believes will increase systemic risks across the US financial system.”
“Surging oil prices: a new concern for central banks.
“Surging oil prices have become a new concern for central banks, aggravating the current ‘trilemma’ of how to balance slowing economies, still too-high inflation and the delayed impact of unprecedented rate hikes.”
“Saudi Arabia and Russia Win Big in Gamble on Oil Cuts.
“Saudi Arabia and Russia have raked in billions of dollars in extra oil revenues in recent months, despite pumping fewer barrels, after their production cuts sent crude prices soaring… The extra funds are also ensuring Russian President Vladimir Putin can sustain his war in Ukraine.”
“Shale Isn’t Coming to the Rescue…
“U.S. shale companies aren’t rushing to drill more. That means that unlike in past years when frackers flooded the market with crude and alleviated pressure, oil prices might remain elevated until someone else adds production or demand ebbs [or demand craters if we have a major debt crisis].”
“America’s emergency oil reserve is at a 40-year low — and that could inflate oil prices, Goldman Sachs says.
“America’s emergency oil stockpile has plunged to 40-year lows. The shrinking Strategic Petroleum Reserve is limiting Washington’s ability to shield consumers from the fallout of Saudi Arabia’s aggressive supply cuts, according to Goldman Sachs.”
“JUST IN: US net interest payments as a percentage of government receipts rise to 15%.
“This percentage has doubled over the last 2 years and now is at its highest since 1998. The US is about to see its first ever year with $1 trillion+ in interest expense. At the same time, US Federal tax receipts are now down 8.4% on a 12-month basis. We have rapidly rising debt levels with rising rates and falling government revenues. What’s the game plan here?”
“There’s a 90% chance of a government shutdown: Goldman Sachs.
““A shutdown this year has looked likely for several months, and we now think the odds have risen to 90%,” Jan Hatzius, chief economist and head of global research at Goldman Sachs, wrote in a note to investors. Hatzius and his team say the most likely scenario is the government will shut down on Oct. 1.”
“Costco is selling gold bars and they are selling out within a few hours.
“Costco is well-known as a place to get bargain prices on any variety of items, from food to luggage to appliances to gold bars. Wait, gold bars? Yes, the retail warehousing giant is your one-stop shop for 1 ounce gold PAMP Suisse Lady Fortuna Veriscan bars, handsomely detailed and ready for purchase.”
“US consumer spending was much weaker in the second quarter than previously estimated…
“…consumer spending, America’s economic engine, was revised much lower, to a 0.8% annualized rate, according to data released Thursday. That’s down from the 1.7% rate reflected in the previous estimate. Spending in the second quarter grew at its weakest pace since the first quarter of 2022, when it was flat.”
“US mortgage rates surged to their highest level in nearly 23 years this week as inflation pressures persisted.
“The 30-year fixed-rate mortgage averaged 7.31% in the week ending September 28, up from 7.19% the week before, according to data from Freddie Mac released Thursday. A year ago, the 30-year fixed-rate was 6.70%.”
“London is suffering an office ‘recession.’ Meta just paid $181 million to dump a lease.
“London’s office market has plunged into a “rental recession,” with the share of empty space hitting its highest level in three decades, investment bank Jefferies said in a note Wednesday. The New York-based firm said vacancies in the City of London, the UK capital’s historic financial district, accounted for 10% of the area’s total office space…”
“Too much [UK] government borrowing is undermining faith in official economic forecasts, the Institute for Fiscal Studies has warned.
“The think tank said a raft of unexpected and expensive policies rolled out by recent Chancellors had led to a surge in the size of the state and fuelled Britain’s deficit, while also making forecasts less accurate.”
“Watering down water – how Rishi Sunak’s reneging on climate commitments makes zero difference… What no-one is admitting… is that the UK’s net-zero plans along with those of every government on the planet, were already 100% inadequate…
“Put simply, far worse things are happening far, faster than expected but our ‘net-zero’ targets and related actions remain based on old, massively out-of-date (aka wrong), much less severe projections.”
“Britain has given the go-ahead to develop the UK’s biggest untapped oilfield off Shetland, sparking outrage from environmental campaigners.
“The UK oil and gas regulator’s decision to grant the Oslo-listed Equinor and the British firm Ithaca Energy permission to develop the Rosebank oil and gas field in the North Sea was condemned by the Green party MP Caroline Lucas as “the greatest act of environmental vandalism in my lifetime”.”
“Germany Seeks to Lock In LNG Deals to Avoid Cargo Diversions…
“Germany wants to lock in contracts for liquefied natural gas with a delivery obligation, an effort to deter profit-chasing traders from diverting shipments elsewhere as the nation boosts its commitment to the fuel.”
“German economic slump will be worse than feared, warn economists…
“Oliver Holtemöller at the Halle Institute for Economic Research said the recovery from the energy crisis has been painfully weak. He said: “The most important reason for this revision is that industry and private consumption are recovering more slowly than we expected in spring.””
“Germany announces border controls to combat migrant surge.
“Germany will introduce new border controls with Poland and the Czech Republic this week, the German interior minister announced on Wednesday, saying that more should be done to protect the European Union’s fragile system of open borders.”
“Italian PM steps up crackdown on migrants with deportation decree.
“Foreigners who lie about their age to benefit from a protection scheme reserved for unaccompanied minors arriving in Italy will be deported under a security decree expected to be approved by Giorgia Meloni’s cabinet on Wednesday as part of her far-right government’s crackdown on irregular immigration.”
“European bond market hit by Italy’s plans for higher borrowing.
“European government bond prices dropped sharply on Thursday as investors took fright at Italy’s larger than expected budget deficit and mounting concerns that central banks will keep interest rates high for an extended period.”
“Eurozone bank lending still under pressure from higher rates.
“Bank lending to businesses in the eurozone dropped sharply in August while household borrowing ticked up slightly. Overall, higher rates and weak economic activity will dampen investment in the quarters ahead, keeping economic activity sluggish at best.”
“Wow chart! Based on SWIFT international payments, we are witnessing ‘de-euroization’ and not ‘de-dollarization’. The euro’s share in SWIFT global payments has dropped to 23% from 38% at the start of the year.
“Are Russia’s SPFS and China’s CIPS eating up the euro? By the way, China’s share in SWIFT payments reached an all-time high of 3.47% in August!”
“Fuel Hoarding Unnerves Polish Refiner in Push to Cut Prices.
“Poland’s state-controlled refiner Orlen SA appealed to Poles to refrain from hoarding fuel following reports that its bid to hold down prices is causing shortages of diesel at some gas stations… Orlen’s attempt to shield Poles from rising global oil prices ahead of a parliamentary election on Oct. 15 is starting to backfire.”
“Moscow Mulls New Steps to End Domestic Fuel Crisis…
“Moscow is proposing a number of additional measures to resolve the crisis on the domestic oil products market on top of the gasoline and diesel export ban introduced last week… proposed steps include increasing the duty for the so-called “gray” exporters that buy products on the domestic markets for sale outside the country…”
“China’s Latest Move Could Further Raise Global Diesel Prices…
“China may not issue additional fuel export quotas this year, which could further raise global diesel prices amid tight supplies and a still unknown duration of a Russian export ban currently in force. The Chinese authorities have already told the biggest oil refiners in the world’s top crude oil importer not to rely on more fuel export quotas for the rest of the year…”
“China’s economic activity again weakened in September, China Beige Book survey shows…
“China’s small economic rebound appears to have stalled in September, with retail sales and pricing power as well as manufacturing production and loan growth weaker than the print for the month before, according to the monthly China Beige Book survey released Friday.”
“Evergrande founder ‘being investigated for suspected crimes’…
“Evergrande Group, which has more than $300bn (£245bn) in total liabilities, did not say whether Hui Ka Yan was still in a position to run the company, or what crimes he was being investigated for. The news came hours after trading in shares of the company was suspended following a report that Hui had been placed under police surveillance.”
“Souring Global Office Bets Raise Risk of Korean Liquidity Crunch…
“Investors in few, if any, countries in the world have been burned as badly by the collapse in the commercial real estate market as those in South Korea. Its pension funds, insurance companies and asset managers all plowed billions of dollars into properties across the globe just before the pandemic drove down their value.”
“Rising poverty grips Argentina as runaway inflation takes its toll.
“Homeless shelters in Argentina’s capital are seeing demand soar as more people are struggling to make ends meet amid an annual inflation rate above 100% that is pushing more people into poverty.”
“Brazil minister says oil and green ambitions are not contradictory.
“…in the same week that Lula was telling the UN General Assembly that the climate crisis “knocks on our door, destroys our homes, our cities, our countries, kills and imposes suffering on our brothers”, Silveira was arguing that exploratory drilling in an ecologically sensitive area where the Amazon river meets the Atlantic should go ahead.”
“Cuban officials have warned that blackouts on the island will increase significantly due to a lack of fuel, potentially worsening the country’s plight as it deals with food and medicine shortages.
“Local governments have already begun announcing restrictions on power usage at state-run companies and other entities, including moves to postpone sporting events and university classes.”
“Broken infrastructure, drought cause power rationing in Tanzania, official says.
“Maintenance issues and climate change-induced water shortages have caused a 400-megawatt electricity shortfall in Tanzania, triggering power rationing across the East African nation, the state power supplier said… only 38% of Tanzanians have power, according to the World Bank.”
“Serbia observes national day of mourning after clashes in Kosovo…
“The killing of a Kosovo police officer and an ensuing gun battle at a monastery in a village close to the Serbian border marked one of the gravest escalations in the former breakaway province in years. Three Serb gunmen were killed in an hours-long firefight with Kosovo police…”
“Over half of Nagorno-Karabakh’s population flees as the separatist government says it will dissolve.
“The separatist government of Nagorno-Karabakh said Thursday it will dissolve itself and the unrecognized republic will cease to exist by year’s end after a three-decade bid for independence, while Armenian officials said over half of the region’s population has already fled.”
“Malaysia grapples with rice shortage amid global price surge…
“Ameer Ali Mydin, managing director of Mydin, a chain of large supermarkets, told Nikkei Asia the shortages are caused by the growing gap in prices between locally produced rice and imported varieties… The country mostly imports white rice from India, Pakistan, Thailand, Vietnam and Cambodia.”
“Climate change, El Nino, Russia war fuel food price surge…
“How do you cook a meal when a staple ingredient is unaffordable? This question is playing out in households around the world as they face shortages of essential foods like rice, cooking oil and onions. That is because countries have imposed restrictions on the food they export to protect their own supplies…”
“Households lost a record €6.6 trillion across the world in 2022…
“2022 was a “turning point” for global wealth, says German financial company Allianz in its latest Global Wealth Report. 2022 was a horrible year for savers as asset prices fell, cutting down savings across the world.”
You can read the previous “Economic” thread here. I’ll be back tomorrow with a “Climate” thread.
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