Daily updates on climate change and the global economy.

13th October 2022 Today’s Round-Up of Economic News

IMF forecasts ‘very painful’ outlook for global economy. The IMF has said there is a growing risk that the global economy will slide into recession next year as households and businesses in most countries face “stormy waters”…

“In an interview with the Financial Times, Pierre Olivier Gourinchas, the IMF’s chief economist, said, “We are not in a crisis yet, but things are really not looking good,” he said, adding that 2023 would be the “darkest hour” for the global economy…

“Although the sharp rises in interest rates around the world were weighing on growth, the IMF said they were necessary to ensure inflation came back under control and restored the global economy to a more stable footing.”


Megathreats by Nouriel Roubini — an avalanche of coming catastrophes…

“Roubini warns in Megathreats that the debt crisis of our lifetimes lies ahead. The entire world resembles the financial delinquent that is Argentina that has defaulted on its debt nine times since its independence in 1816. By the end of 2021, global debt, both public and private, exceeded 350 per cent of the planet’s gross domestic product.


World set for first ‘significant destruction’ of wealth since 2008 financial crisis, says Allianz [really this is not the destruction of wealth but the mirage of financial pseudo-wealth evaporating].

“Global financial assets are set to fall by more than two per cent this year in the “first significant destruction” of wealth since the 2008 financial crisis, a new report by financial services giant Allianz SE said. In real terms, households could lose a tenth of their wealth…”


‘The world should be worried’: Saudi Aramco — the world’s largest oil producer — just issued a dire warning over ‘extremely low’ capacity…

“Saudi Aramco CEO Amin Nasser… warns that oil prices could quickly spike — again. “When you erode that spare capacity the world should be worried. There will be no space for any hiccup — any interruption, any unforeseen events anywhere around the world.””


Biden vows ‘consequences’ for Saudi Arabia after oil output cuts…

“His remarks on Tuesday come a day after influential Democratic Senator Bob Menendez, the chairman of the Senate Foreign Relations Committee, said the US must immediately freeze all cooperation with Saudi Arabia, including arms sales.”


Houston, We Have an Oil Problem… A decline in drilling across the Permian Basin suggests US production forecasts are way too high…

“The vast shale basin is the engine of America’s oil industry, pumping 4.6 million barrels a day… Other shale basins, such as the Bakken in North Dakota, haven’t yet returned to pre-pandemic levels of activity. And output from the country’s legacy — or non-shale — wells is below pre-Covid rates… That’s why the deceleration in Permian drilling is so concerning.”


Yellen Worries Over Loss of ‘Adequate Liquidity’ in Treasuries…

“Treasury debt outstanding has climbed by about $7 trillion since the end of 2019. But big financial institutions haven’t been as willing to serve as market-makers, burdened by the so-called supplementary leverage ratio, or SLR, which requires that capital be put against such activity, as well as against reserve holdings.”


U.S. corporate bond ETFs plunge in global debt market rout.

“”There appears to be a self-reinforcing trend at work, of higher and more volatile yields prompting liquidity to dry up, prompting yet more volatility. This dynamic also seems at work elsewhere,” Capital Economics said in a research note on Tuesday.”


Strikes, possible blackouts and a plunging currency: Brits are being hit by a wave of bad news…

The U.K. economy shrank by 0.3% in August, the Office for National Statistics estimated Wednesday, potentially beginning what economists expect will be a lengthy recession through the winter… Economists expect further volatility in the bond market, and peril for pension funds, in the coming weeks.”


Columbia Threadneedle has suspended dealing on its CT UK Property Authorised Investment fund, in an attempt to shore up its liquidity.

“In a statement, Colombia Threadneedle said this decision was taken “due the amount of cash in the Fund reducing to a level where future redemption requests would not be able to be met until an orderly sale of assets has completed”… This comes the same week that Schroders and BlackRock, along with Threadneedle, also imposed redemption limits…”


UK pension funds are dumping assets to meet margin calls as the BOE confirmed it will end emergency bond buying [Friday], and the reverberations are being felt everywhere from Sydney to Frankfurt and New York…

“The market simply doesn’t have the confidence, for now, that the LDI crisis won’t return and has increased concerns that other pockets of leverage may cause issues,” Janusz Nelson, head of WEI Grade Corporate Syndicate at Citigroup Inc. said.”


The Bank of England has warned that some UK households may face a strain over debt repayments that is as great as before the 2008 financial crisis, if economic conditions continue to be difficult.

““It will be challenging for some households to manage the projected rises in the cost of essentials alongside higher interest rates,” the central bank’s Financial Policy Committee said in its quarterly Financial Policy Summary report released Wednesday.”


Desperate parents reusing filthy nappies as they struggle through cost of living crisis.

“A baby left with pressure sores because their family had to ration nappies; a child sleeping in a drawer because their family didn’t have the money to buy a bed; and a parent forced to re-use dirty nappies because they couldn’t afford fresh ones. These are some of the desperate measures families in the UK are taking…”


LNG carrier rates hit an all-time high on Tuesday, driven by growing prompt demand for gas in Europe as the continent tries to procure supply ahead of the winter.

“The freight rate to charter an LNG carrier in the Atlantic basin surged to $397,500 per day on Tuesday, according to Spark Commodities estimates cited by Bloomberg. The price to hire an LNG ship has now surged by 500% this year.”


EU Ban On Russian Oil Could Spark Worst Energy Crisis In Decades.

“A European ban on most crude imports from Russia will come into effect in December. For EU leaders, the next task at hand has been finding new sources of crude oil ahead of what could be a very dark and cold winter… the world is moving into a much tighter oil market for the remainder of the year after OPEC+ cuts.”


Leak detected in Druzhba pipeline carrying Russian oil to Germany.

“The leak is probably accidental rather than sabotage, Poland’s infrastructure official said, but the incident may stoke fears about the security of Europe’s energy supplies as it seeks to boycott Russian fossil fuels.”


The trials and tribulations of European carmakers are unlikely to end anytime soon, as the industry prepares for the latest crisis: high energy costs.

“Europe’s auto manufacturing industry has barely picked itself up from a crippling semiconductor shortage during the pandemic… Now, a global auto industry forecaster is saying that the energy crisis could curtail new car production by the millions.”


Germany and Italy will slip into recession next year, becoming the first advanced economies to contract in the wake of the Russia-Ukraine conflict [these forecasts still look crazily optimistic to me].

“The German economy is now expected to shrink by 0.3 percent in 2023… Italy, whose industries are also dependent on gas imports, will see its gross domestic product contract by 0.2 percent – also a sharp downgrade from 0.9 percent growth July.”


Germans should stop whining and be prepared with sweaters and candles this winter in case of blackouts amid the energy crisis, according to politician Wolfgang Schäuble.

“In an interview on Tuesday with Bild-TV, the former finance minister and president of the German government said, “You don’t have to whine about it, you have to recognize that a lot of things can’t be taken for granted,” he told the news channel.”


Fears French fuel crisis could spread amid plans to order strikers to work…

“The government is facing a deepening crisis after weeks of stoppages led by the leftwing CGT trade union, which is seeking large pay rises for workers at two oil firms, the French TotalEnergies and the US ExxonMobil. Strikers want better pay amid the cost-of-living crisis and a share of companies’ high profits.”


Democrat Blasts Police for Blocking Anti-Price-Hike Protestors [Elbasan, Albania]…

“Vice Chair of the Democratic Party (DP), Luciano Boçi has criticized Tuesday the State Police for choosing to block citizens who gathered to protest in Elbasan city against the record fuel price hike… No one will forgive Edi Rama for putting his hand in their pocket, to take their sweat and children’s money”, stated Boçi.”


Trading Drought Worsens in Japan’s Broken Bond Market.

“In a fresh sign of Japan’s dysfunctional bond market, the 10-year benchmark failed to trade for a third consecutive session Tuesday, the longest such streak since 1999. The Bank of Japan’s overwhelming presence in the JGB market where it’s the biggest buyer under its curve control policy has exacerbated liquidity issues and led to a deterioration in market functioning.”


The yen has hit a new 24-year low against the US dollar, moving past the ¥145.90 level that prompted Japanese authorities to intervene last month to strengthen the currency for the first time since the late 1990s.

“The Japanese government spent $20bn to prop up the yen but analysts warned that such interventions would have little effect…”


Shanghai and other big Chinese cities, including Shenzhen, have ramped up testing for COVID-19 as infections rise, with some local authorities hastily closing schools, entertainment venues and tourist spots…

“As of Monday, 36 Chinese cities were under various degrees of lockdown or control, affecting around 196.9 million people, versus 179.7 million in the previous week, according to Nomura.”


Ho Chi Minh City residents’ lives turned upside down by gasoline shortages.

“From Saturday, people in many of Vietnam’s southern provinces started struggling to buy fuel for their vehicles. As of Monday evening, Ho Chi Minh City alone had more than 100 closed petrol stations bearing “out of gas” signs, while others rationed their meager supplies.”


No hope for the future: Economic struggles add fuel to Iran’s protests…

““Expect anti-government protests to remain a feature of [Iran’s] political landscape and to increase in frequency, scale and violence as economic conditions worsen and social restrictions are tightened,” said Pat Thaker, Economist Intelligence Unit’s editorial director of Middle East and Africa.”


Syrian pound drops to historic low as economy continues to deteriorate…

“The depreciation of the pound has caused imports to skyrocket in price and shortages of key goods, such as gas and foodstuffs. With the continued decline in the value of the pound, the cost of imports and overall cost of living is expected to increase…”


Tunisians have been hit with soaring food prices and shortages of basic staples in recent weeks [fuel shortages, too] threatening to turn simmering discontent in the North African country — the cradle of the Arab Spring protests — into larger turmoil.

“Sugar, vegetable oil, rice and even bottled water periodically disappear from supermarkets and grocery stores. People stand in line for hours for these food essentials.”


The Democratic Republic of Congo is in talks with oil companies over around $160 million in back payments in a bid to avoid nation-wide fuel shortages that hit the country in September, the government said on Monday.

“Long queues formed at gas stations in major cities earlier this year as stocks dwindled – a situation company and government sources have blamed on delayed payments to suppliers…”


Nigeria Exploring Debt Restructuring, Finance Minister Says.

“Nigeria is considering restructuring its debt and extending the repayment period of its credit obligations, and appointed consultants to advise the government as it faces a rising debt-service burden, Finance Minister Zainab Ahmed said.”


‘Time may be running out’: chronicle of a debt crisis foretold.

“Kristalina Georgieva, the managing director of the International Monetary Fund knows it. David Malpass, the World Bank president knows it too. An increasing number of countries are having problems paying their debts, and the crunch point is fast arriving.”


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

If you found value in this content, please help me continue this work by becoming a patron of my work via Patreon. And if you are already a subscriber or have donated – thank you! It is an enormous help as the cost-of-living crisis ratchets up here in the UK.

11th October 2022 Today’s Round-Up of Economic News

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.”


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.”


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.”


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.””


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.”


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.

If you found value in this content, please help me continue this work by becoming a patron of my work via Patreon. And if you are already a subscriber or have donated – thank you! It is an enormous help as the cost-of-living crisis ratchets up here in the UK.

8th October 2022 Today’s Round-Up of Economic News

Global economy sailing into a ‘perfect long storm’. The world’s finance ministers and central bankers are descending on Washington, D.C., next week, and the gathering will have the feel of an economic Last Supper.

“A recession in advanced economies is now all but certain, and the International Monetary Fund will officially downgrade its 2023 growth forecasts next week. Germany is likely to admit it’s already in recession, and inflation expectations remain elevated.

“Tharman Shanmugaratnam, Singapore’s central bank chair and head of the Group of Thirty — a global council of economic and financial leaders — is warning that we’re headed into a “perfect long storm.” For policymakers, he says, “there are no good options anymore.””


Samsung’s earnings slump on rapid drop-off in chip demand…

Samsung, the world’s top maker of memory chips, smartphones and televisions, is a bellwether for global consumer demand and its disappointing preliminary results add to a flurry of earnings downgrades and gloomy forecasts.”


Epic decline in shipping rates continues…

“…cost to ship 40-ft container from Shanghai to LA has fallen by 76% from its peak, which is largest % decline in history of series.”


Global Fallout From Rate Moves Won’t Stop the Fed.

“The Federal Reserve, like many central banks, sets policy with an eye on the domestic economy. Its battle to control prices is causing pain abroad… Altogether, it is a worldwide push toward more expensive money unlike anything seen before in the 21st century, one that is likely to have serious ramifications.”


The Fed Might Just Break the Global Economy…

“Nevertheless, for now, widespread inflation persists. And the Federal Reserve remains committed to raising interest rates, even as major Wall Street banks warn that further hikes just might break the financial system’s fragile “plumbing.”


The risks from derivatives have morphed. Well-intentioned moves to safeguard the financial system have led to new vulnerabilities…

Substantial moves in interest rates and currencies have affected investors using derivatives to hedge long-duration liabilities, as seen with UK pension funds. Such scenarios raise the prospect of counterparties being unable to find the necessary collateral and then defaulting. In turn, this may trigger asset sales, transmitting price changes across markets.”


Banks dial up risk-taking in OTC derivatives trades by using many of the same non-bank counterparties, a study says…

“A working paper on counterparty choice by major banks in the $12.4 trillion over-the-counter derivatives market offers evidence of systemic risk propagation in bank networks through non-bank counterparties in “opaque” markets… The study comes as questions of systemic risk have arisen recently amid speculation about the financial health of Credit Suisse AG.”


Credit Suisse puts Zurich hotel up for sale in urgent liquidity dash.

“Credit Suisse, the investment bank whose shares plummeted to record lows this week over fears it could be on the brink of collapse, is selling the five-star Savoy hotel in the centre of Zurich for as much as 400m Swiss francs (£361m).”


Say crash and people tend to think of The Great Depression and the Global Financial Crisis: severe economic contractions triggered by financial crises that caused enduring slumps.

But a paper out this week from the Bank for International Settlements suggests, rather worryingly, that oil price shocks tend to have the greater scarring effects on long-term growth.

Imagine the hit to growth were an oil shock and a financial crisis to hit not too far apart…” [the two are not really distinct events; there is a complex interplay between the financial and energy systems, of course].


Clock ticking down on US debt time bomb…

“Washington’s runaway debt is causing intensifying headwinds at home, too. Case in point: widespread reports of liquidity problems with US bond trading. Strategist Krishna Guha at Evercore ISI says the “appreciable and troubling deterioration in Treasury market liquidity” tells a bigger story about where the global financial system finds itself as 2023 approaches.”


Widespread shortages of Adderall and other versions of the drug used for treating attention-deficit hyperactivity disorder (ADHD) are deepening in the U.S., causing desperation in patients who rely on the medication to focus.

“The largest Adderall manufacturer in the U.S., Teva Pharmaceuticals Industries Ltd., said last month that a labor shortage from earlier in the year disrupted production…”


UK companies are collapsing at the fastest rate since the height of the global financial crisis as surging energy bills drive thousands of firms out of business.

“There were more than 5,600 insolvencies in England and Wales in the second quarter – the highest level since 2009, according to the Office for National Statistics.”


UK power cut warning prompts fear for people using life-saving machines [renders the term, “cost of living” scarily literal].

“Rolling power cuts enforced this winter if gas supplies run extremely low could endanger thousands of people who use life-saving machines at home, health leaders have warned. They spoke out after National Grid warned on Thursday that households could experience a series of three-hour electricity outages this winter…”


Shetlanders ‘worried they will not survive the winter’ as energy crisis grips islands.

“Many households have no access to mains gas and rely on electricity and oil to power and heat their homes. It means energy costs on the island are more expensive than on the mainland. Islander Mandy Johnson has decided to sleep in her living room to help keep warm.”


Why La Nina could make the energy crisis even worse in the coming weeks… how could this impact the UK?

“…“In these conditions, there is a chance of easterly winds leading to lower than usual temperatures. There is a higher than usual chance of having a cold outbreak at the beginning of winter.””


EU leaders reaffirm support for Ukraine, squabble over gas price cap.

“European Union leaders on Friday agreed to give more financial and military aid to Ukraine, but a full day of talks in Prague’s ornate royal castle seemed to bring them no closer to deciding on whether or how to cap gas prices.”


People in Poland are burning garbage, and Romania is capping firewood prices as desperation grows amid Europe’s energy crisis…

“Residents of a suburb outside Warsaw told Bloomberg that they can smell trash burning everyday now, while some towns are noticing less garbage is being picked up.” … Sources cited by the Washington Post told the paper that “firewood is the new gold.””


German gas regulator: slash gas use or risk winter crisis.

“German households and small businesses last week used nearly 10% more gas than the four-year average for that week, Germany’s network regulator said on Thursday, warning Germany risked a winter crisis unless significant cuts were made.”


Cyprus in renewed push to extract natural gas as shortages loom in EU.

“Cyprus expects natural gas from its seas to become commercially available by 2027, its energy minister said on Friday, adding that Europe’s energy crisis had put a renewed focus on how to expedite development of reserves in the east Mediterranean.”


Japan’s foreign exchange reserves fall by record $54bn… China’s foreign currency holdings also dropped in September as the strength of the dollar rose…

“Japan’s foreign reserves dropped by a record $54bn to $1.24tn after authorities spent nearly $20bn last month to intervene in currency markets to stem the yen’s fall.”


The dollar’s towering strength drives Korea to double-down in defense of its struggling currency.

“South Korea’s government will take steps to boost the supply of US dollars in local currency markets, as the won’s dismal performance this year drives uncertainty about the country’s economy.”


Iran’s fierce protests are in their third week – with no sign of slowing down.

“Iran’s president has stated that the government will not accept chaos on the streets – an all too clear indication that the violent crackdown on protests will continue. However, Iran’s well-honed state apparatus for repressing dissidents has not been able to quell demonstrations or diminish the morale of protesters…”


Iraq’s Oil Industry Threatened by Political Unrest.

“Clashes erupted on Tuesday in Iraq’s oil-rich Basra region following rocket attacks on the presidential palace, intensifying concerns that unrest in Baghdad could directly threaten the country’s oil industry… The clashes pit al-Sadr’s militias against his southern rivals in the Asaib Ahl al-Haq faction, which benefits strongly from oil revenues.”


Kenya misses out on IMF food relief billions amid price surges…

“”…countries already engaged with the IMF through active borrowing programmes that are on track – like Kenya has, with its economic programme supported by the arrangements under the Extended Fund Facility and Extended Credit Facility – would not qualify to use the new facility,” the spokesperson said.”


$1 Billion That Banks Sent to South Sudan for Food and Medicine Vanished, Probe Finds…

“The funds were meant to help local traders pay for imports at a time when they were struggling to do so because of a shortage of foreign exchange in the country and the weakness of South Sudan’s currency. Instead, the letters of credit were awarded to companies “that only existed on paper…”


‘Gold dust’: Liberians queue for rice…

“Supply-chain disruptions and Russia’s war in Ukraine have caused food shortages and high prices across much of the world. But Liberia, a West African nation of five million people, has been hit particularly hard, with the government and UN blaming a delay in shipments.”


Around 82,000 homes and businesses were still without power in Puerto Rico on Thursday, over two weeks after Hurricane Fiona caused an island-wide outage for its 3.3 million people.

“Fiona plowed into Puerto Rico on Sept. 18, about five years after Hurricane Maria also knocked out all power on the Caribbean island.”


Haiti: Fuel crisis prompts appeal for humanitarian corridor amid cholera outbreak…

“The rising insecurity in Haiti in recent months has affected the lives of ordinary citizens, who face movement restrictions, lootings, sexual violence, and other horrors. Due to the crisis at the terminal, people in the capital have resorted to buying fuel on the black market at exorbitant prices.”


IMF chief warns world heading towards age of greater instability.

“The world faces growing recession risks and a “fundamental shift” away from relative stability to an age of breakdown in international relations and more frequent natural disasters, the head of the International Monetary Fund has warned.”


Joe Biden has warned the world could face “Armageddon” if Vladimir Putin uses a tactical nuclear weapon to try to win the war in Ukraine.

“The US president made his most outspoken remarks to date about the threat of nuclear war, at a Democratic fundraiser in New York, saying it was the closest the world had come to nuclear catastrophe for sixty years.”


You can read the previous “Economic” thread here. I’ll be back on Monday with a “Climate” thread.

If you found value in this content, please help me continue this work by becoming a patron of my work via Patreon. And if you are already a subscriber or have donated – thank you! It is an enormous help as the cost-of-living crisis ratchets up here in the UK.

6th October 2022 Today’s Round-Up of Economic News

Brace yourself for nasty surprises from the financial system. A genuine crisis tends to come out of the clear blue sky, only obvious in hindsight…

Welcome to the world of shadow banking.

“By definition, since this activity is not being undertaken by systemically-important banks, it is not so tightly regulated or closely monitored. The worry… is that pockets of potentially risky activity may have built up that nobody really knows about or don’t properly understand…

“We know this activity is out there. Just after the financial crisis, non-bank financial institutions held a similar value of assets as banks. Now their collective balance sheets are about 25pc bigger. A lot of corporate and consumer credit, for example, has been packaged up and held by the likes of private equity firms and hedge funds.

“Do these alternative investors have the appropriate risk management skills and controls in place to cope with the losses if companies and consumers start defaulting en masse amid rising borrowing costs and a strengthening dollar? Here’s hoping.

“And, if not, can we be sure no individual firm is so big or interlinked with others that it sets off a chain reaction? Fingers crossed.”


How Hidden Risks at Pension Funds Almost Toppled Britain’s Bond Market. Once again, a “low-risk” investing strategy turned out to be anything but…

“Like other meltdowns—remember MBSs, CLOs, and CDOs—this came with financial engineering and an obscure acronym: LDI, or liability-driven investing. Never heard of it? You’re not alone. A lot of seasoned financiers spent hours reading explainers to make sense of it.”


The gilt market crisis was just the first tremor of the brewing financial earthquake…

Even for governments, credit is all of a sudden becoming a whole lot more expensive. This change is going to find its expression in all kinds of mini-financial crises in the months ahead, many of which we can at this stage only guess at. The danger is that these random fires eventually erupt into a giant and all-consuming fireball.”


Global bond funds see biggest outflows in two decades…

“Governments and companies have borrowed heavily in the past few years, taking advantage of ultra-low interest rates, and they now stare at bigger interest liabilities due to a rise in yields.”


IMF warns funds with illiquid assets pose risk to financial stability.

“Withdrawals from open-ended bond funds have increased in recent months, the IMF noted, and another shock could “trigger further outflows”, with a mismatch between redemptions and illiquid holdings posing a “major potential vulnerability”.”


As Global Recession Looms, a Perilous Moment for Central Banks.

“Right now, all the main parts of the global economy are slowing down. China’s economy has stalled… Meanwhile, Europe’s economy looks to be heading toward a recession this winter on the back of the cutoff in Russian gas supplies, and the U.S. economy has clearly downshifted over the course of this year.”


The First Global Deflation Has Begun, and It’s Unclear Just How Painful It Will Be. We now find ourselves in the midst of the most comprehensive tightening of monetary policy the world has seen…

Will it get inflation down? Very likely. But we are also courting the risk of a global recession that at its worst could bring down housing markets, bankrupt businesses and states, and throw hundreds of millions of people worldwide into unemployment and distress [I disagree that this is the worst-case scenario; the situation he describes could become irreversibly self-reinforcing].


The long forecast stagflationary debt crisis has begun…

“…the latest distress in financial markets—including bond and credit markets—has reinforced my view that central banks’ efforts to bring inflation back down to target will cause both an economic and a financial crash.”


Global manufacturing PMI falls into contraction territory for first time since 2020 lockdowns.

“…the JPMorgan Global Manufacturing Purchasing Managers’ Index, compiled by S&P Global, dropped below the neutral level of 50.0 for the first time since June 2020. The headline index dropped from 50.3 in August to 49.8 in September.”


Trade growth to slow sharply in 2023 as global economy faces strong headwinds…

“Import demand is expected to soften as growth slows in major economies for different reasons. In Europe, high energy prices stemming from the Russia-Ukraine war will squeeze household spending and raise manufacturing costs. In the United States, monetary policy tightening will hit interest-sensitive spending…”


Steel and Iron-Ore Prices Are Weakening as Global Economy Slows…

“The global economy was supportive of base metals in the first half of this year amid a post-Covid rebound, says Sherwood. Base metals are now moving lower, with Europe and North American markets entering into “at least technical recessions and worse in the case of Europe’s industrial heartlands.””


The OPEC+ alliance announced Wednesday that it will cut oil production by 2 million barrels a day, a move that’s likely to send gas prices higher again after a year of tumult at the pump.

“In its statement announcing the cuts, the OPEC+ alliance cited the “uncertainty that surrounds the global economic and oil market outlooks.””


Nuclear share in energy generation falls to lowest in four decades…

“Proponents of nuclear say as a low-carbon power source it could be vital in helping countries meet climate targets, but several plants around the world are coming to the end of their life expectancies and many new ones have faced delays.”


U.S. National Debt Eclipses $31 Trillion For First Time.

“America’s national debt surpassed $31 trillion for the first time this week, the Treasury Department said Tuesday, as the country battles high inflation and contends with rising interest rates.”


US mortgage rates jumped to a 16-year high of 6.75%, marking the seventh-straight weekly increase and spurring the worst slump in home loan applications since the depths of the pandemic.

“The contract rate on a 30-year fixed mortgage rose nearly a quarter percentage point in the last week of September…”


Americans are running out of money and big companies like Target and Walmart are noticing. It makes a recession more likely.

“The financial cushion protecting Americans from sky-high inflation is smaller than previously thought. As savings dwindle, the chances of a severe recession mount. Household finances are in a worrying decline.


UK’s Credit Outlook Cut to Negative by Fitch on Fiscal Risk…

“Britain’s most radical package of tax cuts since 1972, combined with plans for large-scale borrowing, sent UK markets into a tailspin last week, with the pound hitting the lowest-ever level against the dollar while borrowing costs soared.”


Europe’s gas crisis set to deepen after winter drains reserves.

“Europe may limp through the cold winter months with the help of brimming natural gas tanks despite a plunge in deliveries from former top supplier Russia only to enter a deeper energy crisis next year, the head of the International Energy Agency said… The real challenges will begin in February or March…”


Energy crisis: An EU cap on gas prices would end the market as we know it, experts warn.

“As the European Union stares into the abyss of a potentially catastrophic energy crisis, policymakers are becoming increasingly frantic about what to do next, what message to give and what relief to offer for households and companies under extreme financial stress.”


German minister criticizes U.S. over ‘astronomical’ natural gas prices.

“Germany’s economy minister accused the U.S. and other “friendly” gas supplier states of astronomical prices for their supplies, suggesting they were profiting from the fallout from the war in Ukraine… Europe is facing a hard winter with gas shortages predicted across the region.”


The Massive Gas Field That Europe Can’t Use.

“Beneath the windmill-dotted marshlands of the Netherlands lies Europe’s largest natural gas reserve… Drilling has led to repeated earthquakes, and Dutch officials are loath to risk a backlash from residents by breaking promises… Dutch officials have said that if Germany needs more energy, a safer option would be to further prolong the life of its nuclear plants…”


France’s nuclear energy strategy — once its pride and joy — faces big problems this winter…

“France faces a winter of discontent, energy analysts say, as deep-rooted problems with its nuclear-heavy energy strategy raise serious questions about its preparedness for the colder months… more than half of EDF’s nuclear reactors have been shut down for corrosion problems, maintenance and technical issues in recent months…”


France taps strategic fuel reserves as refinery strike grinds on.

“France has tapped its strategic fuel reserves to resupply petrol stations that have run dry, the government said on Wednesday, amid strikes by workers at refineries and depots that have stunted production and blocked deliveries.”


Japan to introduce restrictions on city gas usage.

“The planned revision is aimed at developing a system to curb demand during times of emergency, as uncertainty is growing over stable overseas procurement of liquefied natural gas (LNG)… The government will issue a city gas usage restriction order if demand exceeds supply…”


South Korea’s Foreign Reserves Fall Most Since Global Financial Crisis.

“South Korea’s foreign reserves shrank by the most in almost 14 years in September, as the central bank drew on them to shore up a won that’s under pressure from the Federal Reserve’s policy tightening… The won has been the worst performing currency in Asia after the Japanese yen this year.”


At least 130 million people in Bangladesh were left without power on Tuesday after a grid failure caused widespread blackouts, the government’s power utility company said.

Bangladesh has suffered a major power crisis in recent months as a result of higher global energy prices following Russia’s invasion of Ukraine, and has imposed regular cuts to conserve electricity.”


Energy crisis feared by Europe long a reality in Iraq…

“The Middle Eastern country is rich in oil, but endemic corruption and devastating conflict have taken a heavy toll on its infrastructure and forced most of its 42 million people to adapt… “Without generators, Iraq would go completely dark,” Mohammed Jabr, a retired public servant, told AFP…”


Egypt’s private sector wheat imports stall due to dollar shortage.

“The price of wheat and flour used to make unsubsidised bread has spiked in Egypt as importers struggle to pay for wheat stuck at ports amid a dollar shortage, traders and the country’s chamber of cereals told Reuters this week.”


Fuel crisis worsens in Abuja [Nigerian capital]…

“Petrol scarcity crisis in Abuja worsened on Wednesday as more fuel stations ran out of stock but could not restock. The few that dispensed the product had very long queues snaking, while black marketers took advantage of the situation to sell petrol at N350/litre to motorists not willing to be detained for a long time in queues.”


Nigerian oil export terminal had theft line into sea for 9 years.

“Officials in Nigeria discovered an illegal connection line from one of its major oil export terminals into the sea that had been operating undetected for nine years… Thieves often tap land-based pipelines to siphon oil undetected while they continue to operate, but an illegal line in the ocean is highly unusual and suggests a more sophisticated theft operation.”


Engulfed in gang violence and a series of acute humanitarian crises as hospitals are forced to close, Haiti has now been hit by a new outbreak of cholera.

“At least eight people have died in the past few days, Haiti’s public health and population ministry said on Sunday. Thousands died in the last big cholera outbreak in the country in 2010.”


When the Seawater Turns Pink, Poor Venezuelans Rush to Cash In [to Pampatar salt flats]…

“The pools cover salt flats that took shape centuries ago, and the pinker the water, the higher the density of salt coating the sea floor. So, they arrive early, pushing makeshift wheelbarrows and lugging rakes and shovels and begin plying a gruelling craft with a method so low-tech that it would have been familiar to their ancestors.”


Worldwide fertiliser shortage prompts Peru to turn to bird poo…

“Peru’s government has launched the aptly named naval vessel Pelicano to transport the pungent cargo from coastal islands and peninsulas to the mainland where prices of imported fertilisers have tripled or quadrupled in price.”


Global Progress in Reducing Extreme Poverty Grinds to a Halt…

“The Bank’s latest Poverty and Shared Prosperity Report provides the first comprehensive look at the global landscape of poverty in the aftermath of the extraordinary series of shocks to the global economy over the past few years. It estimates that the pandemic pushed about 70 million people into extreme poverty in 2020, the largest one-year increase since global poverty monitoring began in 1990.”


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

If you found value in this content, please help me continue this work by becoming a patron of my work via Patreon. And if you are already a subscriber or have donated – thank you! It is an enormous help as the cost-of-living crisis ratchets up here in the UK.

4th October 2022 Today’s Round-Up of Economic News

The UN has called on central banks not to increase interest rates and depart from the monetary policy being pursued by a large number of western regulators, including the Bank of England.

A recession worse than that experienced after the global financial crisis could result from monetary regulators tightening policy and hiking interest rates, the United Nations Conference on Trade and Development (UNCTAD) has warned.”


High interest rates paid by poorer nations spark fears of global debt crisis.

“Fears of a deepening global debt crisis have been highlighted by research showing that low-income countries are paying rocketing interest on their foreign borrowing… Ethiopia and Zambia have both seen 25-point increases in their debt servicing costs…”


World economy roiled by simultaneous shocks echoing 2007 anxiety.

“The world economy is showing signs of a rapid downshift as it contends with a series of shocks — some of them self-inflicted by policymakers — increasing the likelihood of another global recession and the danger of major financial disruptions.”


Energy crisis seen posing ‘existential threat’ to climate goals…

““We’re in a transformational moment,” said Steve Malkin, CEO of environmental consultancy Planet Mark, noting the war in Ukraine and resulting energy crisis posed an “existential threat” to countries’ sustainability goals.” [picture from Essex, UK, summer 2022].


US coal prices surged past $200 for the first time as a global energy crunch drives up demand for the dirtiest fossil fuel.

“Spot prices for coal from Central Appalachia rose to $204.95 a ton for the week ending Sept. 30, the highest in records dating to 2005, according to data released Monday by the US Energy Information Administration.”


Wall Street: U.S. housing market to see the second-biggest home price decline since the Great Depression…

“Not only is there a building consensus on Wall Street that we’ve entered into a period of falling home prices, but there’s also a consensus it will be the second-sharpest home price decline since the Great Depression.”


September’s Credit Wipeout Foretells Even More Pain in Junk Debt.

“The pain is just beginning for investors in US credit markets after Federal Reserve tightening and recession angst sent investment-grade bonds, high-yield debt and leveraged loans spiralling in September.”


Canadian consumer confidence has dropped to near record lows again amid growing angst about the global economy.

“The Bloomberg Nanos Canadian Confidence Index, a measure of sentiment based on weekly polling, declined for a fifth straight week to touch some of the weakest levels ever outside of the last two economic crises.”


The price of groceries could surge by £1.7bn due to the cost of carbon dioxide rising by as much as 3000%, new analysis has shown.

“The UK‘s food and drink sector could end up footing the mammoth extra bill for liquid CO2 if gas prices remain high, according to research by the Energy and Climate Intelligence Unit (ECIU).”


‘Huge turnouts’ reported at UK cost of living protests.

“Thousands have gathered in dozens of towns and cities across the UK to register their anger at the cost of living crisis in what organisers describe as the largest wave of simultaneous protests seen in Britain for years.”


Great Britain’s energy regulator has warned there is a “significant risk” of gas shortages this winter, which could also hit electricity supplies.

“Ofgem’s head of wholesale market management, Grendon Thompson, said a gas supply emergency could impose “load shedding” on the largest consumers, forcing gas-fired power stations to close.”


European Union members are preparing for the possibility of power shortages this winter due to the continuing squeeze in energy supplies.

“This is according to reports citing a senior Brussels official, who said that the bloc is working on two scenarios featuring blackouts, Reuters wrote today.”


Europe’s deglobalization and surging nationalism have echoes of the 1930s. Now it’s heading into a major energy crisis…

“The decade leading up to World War II was marked by a general climate of fear and anxiety in the West. Economic crises and mass poverty broadened the appeal of populist right-wing parties, and lasting trauma from World War I, combined with the Great Depression, fueled isolationism and nationalist foreign policies.”


Europe ‘at epicentre’ of global manufacturing slump as costs soar…

“Germany’s manufacturing activity fell to 47.8 in September, from 49.1 the previous month, according to the S&P Global PMI, taking it further below the 50 level that divides growth from contraction. Analysts said “a growing number of customers” had either postponed or cancelled orders due to rising prices.”


Worst ever bird flu crisis in Europe raises risks for next season – EFSA…

“The spread of highly pathogenic avian influenza (HPAI), commonly called bird flu, is a concern for governments and the poultry industry due to the devastation it can cause to flocks, the possibility of trade restrictions and a risk of human transmission.”


China’s property crash: ‘a slow-motion financial crisis’…

“A property market that has contributed around one quarter of GDP has over the past decade turned sour, triggering a series of secondary effects that are smothering growth in the world’s second-largest economy. Logan Wright, a Hong Kong-based partner at consultancy Rhodium Group, calls the situation a “slow-motion financial crisis”.”


This is the first significant chemicals downcycle for many years…

“Some chemicals companies were close to bankruptcy in late 2008… But then, Whoosh! In January of the following year, China launched the world’s biggest-ever economic stimulus package and global demand went through the roof… Ever since that year, up until very recently, China bankrolled the global chemicals industry.”


Traffic was brought to a grinding halt in Agartala city [NE India] on Sunday as protests broke out in front of CNG (Compressed Natural Gas) refilling stations owing to an “abrupt” rise in the prices.

“The protests were staged mainly by the auto-rickshaw drivers. The Tripura Natural Gas Corporation, the state-owned company that deals in the distribution of CNG, has been accused of hiking the prices significantly.”


Pakistan’s acute energy shortage is at risk of lasting years after the government was unable to secure a long-term supply of liquefied natural gas.

Not one supplier responded to Pakistan LNG Ltd.’s tender to buy the power-plant fuel for between four to six years starting January, said traders with knowledge of the matter.”


Why motorists should be worried about the fuel shortages for airlines in South Africa…

“Aviation expert Des Latham told ENCA that the knock-on effects of not having enough local refinery capacity paired with global supply chain issues and an overreliance on importing fuels could lead to further trouble for motorists.”


Africa’s internet speed is at a record low. The economic impact is huge.

“Even South Africa, the continent’s internet speed leader—with an average mobile internet download speed of 68.9 megabits per second (mbps) is way below the global average mobile download speed of 77.7 mbps.”


Tunisia: Protests and clashes likely to continue nationwide through at least late October.

“Protests and associated clashes are likely across Tunisia through at least late October due to the continued lack of a parliament and high unemployment. Thousands of protesters have periodically taken to the streets of Tunis and other major cities demanding President Kais Saied’s resignation following his decision to rule by decree…”


Depositors, some armed, storm 3 Lebanese banks over withdrawal limits.

“Outraged depositors, at least two of them armed, stormed three commercial banks across Lebanon on Tuesday over withdrawal limits imposed on most clients throughout the country’s financial meltdown. Cases of bank hold-ups have been snowballing across Lebanon…”


Iranian students have stepped up their protests in defiance of a crackdown by security forces, who allegedly cornered and shot a number of students at a prestigious university in Tehran on Sunday night.

“Anti-government protests ignited by the death of a young woman in police custody in mid-September have spread around the country at various levels of intensity, revealing a cultural chasm between Iran’s educated youth and an elderly male religious establishment.”


Cuban protests after Hurricane Ian fade but anger over shortages simmers.

“The protests in Havana appeared to have subsided by Sunday evening, but long lines for food, fuel and medicine – typical in Cuba even before the hurricane – had formed again in the city on Monday morning. “This has been terrible. No light, no food, we lost everything in our freezer,” said Maria Carla Catala, 25…”


Haitian police fire tear gas as thousands protest against government.

“The protest took place on the day schools were meant to re-open after a one-month postponement of the resumption of classes after the summer break because of the economic crisis… Henry acknowledged the right of people to protest over rising prices but condemned the organisers of looting, vandalism and violence.”


Welcome to the Scary, New Inflationary World.

Let’s face it: The days of inflation-free monetary stimulus that globalization facilitated — and serial crises subsequently deepened — are over. This will have all sorts of unintended consequences…”


A new financial crisis may be on the horizon… [the picture is not to suggest that Credit Suisse is our immediate catalyst for one but its vulnerability is certainly ominous].

Previous global financial crises have tended to start in dark corners of the system – and the vastly increased financialisation of almost everything means the system is now as opaque and potentially dangerous, given the levels of global volatility and uncertainty, as it has ever been.”


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

If you found value in this content, please help me continue this work by becoming a patron of my work via Patreon. And if you are already a subscriber or have donated – thank you! It is an enormous help as the cost-of-living crisis ratchets up here in the UK.

1st October 2022 Today’s Round-Up of Economic News

The world is flirting with another global financial crisis, and the next few weeks are key.

It’s hard to overstate the magnitude of the financial trouble Britain and, because of its financial heft, the world found itself in this week. We came within inches of “global financial crisis mark 2”. That’s not hyperbole.

“Towards the end of 2008, it was clear many Wall Street investment banks were on the brink of collapse. They were sitting on tens of billions of dollars’ worth of rubbish assets – mortgage-backed securities attached to properties plummeting in value.

“A credit crunch was sparked when the US government allowed Lehman Brothers to collapse. It was sitting on a lot of these worthless assets. Suddenly, it was unclear who could afford to repay loans and who couldn’t. We’ve just flirted with a scenario of similar magnitude.

The problem now is, well, the flirtation is not over.


UK government bond tumult ripples into US and European markets…

““Even though the UK is a basket case of its own making, the fact is the same pressures are being acutely felt elsewhere,” said Richard McGuire, a rates strategist at Rabobank. “Investors see the government’s ill-conceived experiment, and wonder if it’s a sign of things to come in other countries.””


Investors dump global bond and equity funds on recession risks.

“Global bond and equity funds witnessed massive outflows in the week ended Sept. 28 as worries about a recession grew, with the U.S. Federal Reserve determined to keep interest rates higher to tame inflation pressure.”


What a cliff.

“And the fiscal cliff is even bigger.

“An unprecedented abrupt halt to the flow of money – both for the financial system and the real economy.”


Credit markets are starting to buckle under pressure from soaring yields and fund outflows, leaving strategists fearing a rupture as the economy slows.

“Banks this week had to pull a $4 billion leveraged buyout financing, while investors pushed back on a risky bankruptcy exit deal and buyers of repacked loans went on strike. But the pain was not confined to junk — investment-grade debt funds saw one of the biggest cash withdrawals ever…”


Wall Street extends its worst run since the financial crisis…

“The index has now suffered its third straight quarter of losses for the first time since 2008-09, when the world’s financial system was in meltdown. All told, the market is down by 25% in 2022. Few sectors have been spared from the carnage…”


The World Bank chief warns ‘perfect storm’ of stagflation and global recession: ‘A tough reality confronts the global economy’…

“Rich and poor countries around the world have resorted to raising interest rates this year in an effort to reduce domestic inflation. But Malpass cautioned that this approach was significantly raising the risks of a global recession, and urged nations to think of different strategies.”


Unbelievable decline in shipping rates…

“Cost to send 40-ft container from Shanghai to Los Angeles has fallen by 74% from peak and is back to August 2020 levels.”


Korea’s Exporters Show More Hints of Slowdown in Global Demand…

“Soaring stockpiles at Korean manufacturers, whose exports are seen as a bellwether for global growth, come as central banks across the world raise interest rates to combat inflation. Suppliers are “feeling a burden” with rising inventories as consumption slows “faster than their expectations,” said Kim Hojung, an economist at Seoul-based Yuanta Securities Korea.”


Micron Forecast Signals That Chip Market Slump Is Deepening.

“Micron Technology Inc., the largest US maker of memory chips, gave a weak forecast for the current quarter, renewing concern that demand for personal computers and smartphones is falling off.”


OPEC+ Is Considering A Substantial Oil Production Cut.

“Several major producers of the OPEC+ alliance have started talks about a potential oil production cut ahead of the regular monthly OPEC+ meeting on October 5, OPEC and OPEC+ sources told Reuters on Thursday.”


The biggest rail strike in Britain for decades will bring most trains to a halt throughout Saturday, with unions combining industrial action for the first time this year.

“No trains will run in many areas, with no direct services at all on some intercity routes between London to Birmingham, Manchester and Edinburgh.”


Britons to burn their bills in weekend wave of cost of living protests.

“In what organisers forecast will be the largest nationwide protests against an economic crunch, which got worse this week with money market chaos and mortgage rate rises looming, dozens of rallies will be staged from Plymouth to Aberdeen, while postal and railway workers also strike.”


Thousands Protest in France Against Inflation, Macron’s Pension Plan. Demonstrations are a sign of the political turmoil Europe faces as a result of the Ukraine war…

“Striking teachers, students and railway workers joined peaceful protests in dozens of cities across the country, snarling traffic and forcing many schools to shut down. The Eiffel Tower remained closed.”


‘I’ve never seen anything like it’ – firewood dealers refuse orders as fear of running out of fuel sparks shortage [Ireland]…

“Firewood suppliers say they are dealing with unprecedented demand for fuel, with the market being driven by spiralling fears of winter fuel shortages among families and pensioners.”


Poland allows use of brown coal to heat homes amid supply crisis…

“Lignite, the more polluting type of coal, is used to generate electricity but has been banned in home furnaces in Poland for several years to improve air quality. In response to Russia’s invasion of Ukraine, Poland in April introduced an immediate ban on Russian coal used by millions of households and heating plants in smaller towns.”


German €200bn energy support plan sparks ‘animosity’ within EU.

“Germany’s pursuit of a massive borrowing package to help its economy withstand the energy crisis has heightened tensions among EU member states as they struggled to forge a common approach on lowering gas and electricity prices at meetings in Brussels.”


Slovakia could stop power exports if doesn’t get more EU help.

“Slovakia could halt electricity supplies to other European Union countries if it doesn’t get more help to cope with soaring energy costs, its prime minister warned on Friday, saying measures agreed by the bloc so far did not go far enough.”


Europe’s Diesel Crunch Is Set to Worsen…

“Mark Williams, an analyst at Wood Mackenzie, doesn’t expect diesel stocks to build from current levels. “We expect prices to really spike … mid-January, probably February, but we may see a spike little bit earlier as the market starts to panic,” Williams told Reuters.”


Eurozone inflation hits record 10 percent.

“Eurozone inflation has hit a record high this month, reinforcing expectations for another big interest rate hike from the European Central Bank (ECB) in October. Price growth in the 19 countries sharing the euro accelerated to 10.0 percent in September from 9.1 percent a month earlier.”


Europe’s financial system faces the threat of a systemic crisis caused by the falling value of assets, high interest rates and a decline in property prices, the EU’s watchdog has warned.

“The European Systemic Risk Board, which oversees financial stability risks in the European Union, issued a rare general warning on “severe” financial risks emerging this year and called on policymakers to take “decisive action”.”


Europe’s descent into deindustrialisation.

“The rapid economic collapse that Britain is facing is simply an accelerated version of what the whole of Europe is about to go through; unsustainable borrowing to fund the gap between high energy prices and what households can actually afford. With the sabotage of the Nord Stream pipeline, there is now no feasible way back.


China just boosted bank liquidity by 843%, adding further pressure on the yuan as the currency suffers its weakest year in almost 3 decades.

“The Golden Week holiday next week and Communist Party events are likely reasons for the massive cash influx. But the liquidity boost adds more pressure on the yuan, which is on track for its worst annual performance since 1994.”


South Africa: Morphine Shortages Leave Patients in Pain.

“The short-sightedness of relying on a single morphine powder supplier for South Africa’s healthcare facilities has been pinpointed as the cause of a devastating disruption in the supply of liquid morphine that has left some terminally ill patients suffering for over three months.”


The Funeral Federation of South Africa said that funeral parlours were struggling to keep their businesses operating with the persistent rolling power cuts.

“The federation said they’ve had to hike their prices to cover expenses from the long-term use of generators.”


Unrest in Iran Spreads to Remote, Restive Provinces.

“At least 19 people were killed in Iran on Friday during anti-government protests in a southeastern province that is home to a restive ethnic minority, as unrest spread to remote regions of the country in a new challenge to the ruling Islamic establishment.”


Protests in Cuba erupt after days without power following Hurricane Ian.

“On Friday morning, the Energy and Mines Ministry said that 60% of the capital, Havana, and 88% of the Mayabeque province had power restored. But most of the country of about 11 million was still without electricity.”


At least 12 Haiti prisoners dead for lack of food, medicine, official says.

“At least 12 prisoners in Haiti died for lack of food or medicine in the month ending in mid-September, a Haitian official said on Thursday, adding the figure had likely risen since then due to a gang blockade that has created crippling fuel shortages.”


Global food crisis: Fuelled by conflict.

When the United Nation’s World Food Programme sets records, it does not bode well for the world… The food crisis is unique because it is unfolding amid a more difficult global context than the food and fuel crises of 2008… The current food crisis is about affordability, meaning that food is available but at a cost that is beyond the reach for millions….”


What’s new is old: how economic discontent triggered unrest in the past.

The French Revolution, a traumatic event that ultimately cost millions of lives and kickstarted modern Europe, was preceded by an estimated 55% rise in the cost of bread. That’s a smaller price hike than some countries have endured recently.


Visualizing the Rise of Global Economic Uncertainty.

“Over the last six years, companies have had to grapple with five major “uncertainty shocks”: First it was Brexit in 2016, followed by the U.S. presidential election, China-U.S. trade-tensions, the Covid-19 pandemic, and in 2022 the Ukraine war.

“These shocks reflect a new normal of greater global turbulence, driven by domestic and international political fragmentation… Our view is that these global shocks are here to stay.


You can read the previous “Economic” thread here. I’ll be back on Monday with a “Climate” thread.

If you found value in this content, please help me continue this work by becoming a patron of my work via Patreon. And if you are already a subscriber or have donated – thank you! It is an enormous help as the cost-of-living crisis ratchets up here in the UK.