Market

Weekly Commentary: The Big Test

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It’s been a while for the reason that Fed commenced a severe tightening cycle. Previous strikes to lift charges progressed gingerly, in order to not threat upsetting the cherished inventory market. One has to return to 1994 for a Federal Reserve decided to really tighten monetary situations. The Fed boosted charges 25 bps on February 4, 1994, 25 bps in each March and April, 50 bps in May, 50 bps in August, 75 bps in November and 50 bps in February 1995. Rates have been hiked 300 bps in twelve months to six.00%.

I’ve vivid reminiscences of 1994. It was a decisive 12 months for up to date finance: Its First Test. Recall that the Greenspan Fed started aggressively slashing charges in response to an escalating banking disaster and recession. There was the large S&L bailout. Banking system impairment was turning extreme, with even worries for Citigroup’s solvency. Enterprising Greenspan to the rescue. Rates have been slashed from 8% in October 1990, all the best way down to three% (lowest since 1963!) by September 1992.

It was the “coming of age” for the awe-inspiring “Maestro.” Alan Greenspan confronted main systemic points. The banking system was in hassle, and one other S&L-type federal bailout risked thrusting already problematic deficits to unwieldy dimensions. The financial system was in recession, with speak of deflation and even the chance of financial despair.

Greenspan was in determined want of a reflationary spark, together with a mechanism to recapitalize the banking system – all with out blowing out fiscal deficits that might threat a bond market conniption and run on the greenback. Enter a steep yield curve and the “government carry trade.” Masterful. Banks may now borrow in short-term funding markets at 3.0%, whereas lending to the Treasury (i.e. 10-year Treasuries) at 8.0%. It was about as near free cash as one can get.

If one thing appears too good to be true, it in all probability is. When I started working for Gordy Ringoen’s fund in 1990, hedge fund trade belongings have been estimated at about $35 billion. By 1993, belongings had surged to round $200 billon. Greenspan’s covert financial institution recapitalization scheme was additionally doling out free cash to the blossoming leveraged speculating neighborhood. Why restrict income to 500 bps yearly (borrow at 3% and lend at 8%) within the “government carry trade”, when returns could possibly be compounded with 200% (or a lot better) leverage. Better but, why not aggressively lever in higher-yielding mortgage securities, together with esoteric “interest only” and “principal only” (IOs and POs) mortgage derivatives? Fortunes have been being made (20% of fund returns to the final associate!), and the trade was rising like wildfire.

The Greenspan Fed allowed this hearth to burn too sizzling. The S&P500 returned 30.4% in 1991, 7.6% in 1992 and one other 10.1% in 1993. The monetary sector was increasing aggressively. Broker/Dealer belongings expanded 19% in 1991, 20% in 1992, and a blistering 24% in 1993. The terribly free monetary backdrop was stoking intense demand for securities to leverage, together with derivatives structured with embedded leverage. The revolution to non-bank Credit (i.e. MBS, ABS, “repos,” GSEs, cash market funds, company Credit, derivatives and Wall Street structured finance) was vigorously supported.

Coming into 1994, it was clear this new mechanism of a Fed-controlled yield curve, speculative leverage, and highly effective progress in marketable Credit devices was about to be examined. Ten-year yields traded at 5.77% the day earlier than the primary Fed hike, and have been at 6.09% two weeks later. Yields have been as much as 6.52% by March 14th, 7.14% by April 18th, 7.50% by September sixteenth and eight.00% on November 4th. Yet the best ache was inflicted on mortgage securities, notably the extra esoteric mortgage derivatives.

From Bloomberg (David Weiss): “It was one of the biggest disasters in the history of Wall Street. David J. Askin’s $700 million array of mortgage-backed derivative funds crumbled in March 1994, dragging down an illustrious roster of investors and triggering a collapse in the market for collateralized mortgage obligations (CMOs).”

Despite the dislocation and carnage, up to date finance handed its first Test in 1994. I used to be stunned and in addition decided to know how such an intense de-risking/deleveraging episode did not change into extra of a systemic difficulty. It was the start of my analytical concentrate on the GSEs. GSE belongings expanded an unprecedented $150 billion in 1994, nearly double the earlier 12 months’s file. Fannie Mae and Freddie Mac, specifically, had advanced from mainly insurers of mortgage securities to change into highly effective quasi-central financial institution suppliers of market liquidity backstops.

GSE belongings would broaden one other $115 billion in 1995, $92 billion in 1996 and $112 billion in 1997. By 1997, hedge fund belongings have been approaching $400 billion. Broker/Dealer belongings surged 22% in 1995, 16% in 1996 and 21% in 1997. Non-bank Credit was sizzling, sizzling, sizzling fodder for leveraged hypothesis.

The 12 months 1997 witnessed the devastating “Asian Tiger” Bubble collapses. When in early 1998 I discerned an analogous destiny awaiting Russia, I believed the second Big Test for the brand new monetary construction was imminent. The collapse of Long-Term Capital Management (LTCM) pushed international finance to the sting. The Test, nonetheless, was finally handed at The Hands (in distinction to Adam Smith’s “invisible hand”) of a Fed-orchestrated LTCM bailout, charge cuts, the International Monetary Fund, and an unprecedented $305 billion 1998 enlargement of GSE belongings (adopted up with an extra $317bn in 1999).

A vital Bubble Dynamic had been revealed: every bursting Bubble required extra aggressive financial stimulus, with reflationary results spurring the following bigger Bubble. The aggressive response to the LTCM debacle unleashed 1999’s wild speculative extra – the Internet mania, an nearly doubling of Nasdaq and loopy telecom debt. Throw stimulus measures at a system with already highly effective inflationary and speculative biases, and also you’re enjoying with hearth. Lesson Never Learned.

A bursting “tech” Bubble can be one other Test for the brand new monetary construction. I believed the Bubble had burst in 2000, however reversed course in early 2002 – warning of the unfolding “mortgage finance Bubble.” The GSEs expanded one other $242 billion in 2000, a file $345 billion in 2001, and $242 billion in 2002. By the tip of 2002, GSE Assets had expanded 300% in 9 years to $2.55 TN. Not surprisingly, a robust inflationary bias had developed all through each U.S. housing and mortgage finance, with 10.6% family mortgage progress in 2001 and 13.3% in 2002. Accommodating speedy mortgage Credit enlargement turned the centerpiece of the Fed’s post-tech Bubble reflationary technique.

“On May 23rd, [2006] the Commission and the Office of Federal Housing Enterprise Oversight jointly announced settlements with Fannie Mae for accounting fraud.”

After the revelation of widespread accounting fraud and different irregularities at Fannie and Freddie, I started warning of one other systemic Test. With the times of open-ended steadiness sheet progress having run their fateful course, the following severe de-risking/deleveraging episode would unfold with out the GSE liquidity backstop. By the tip of 2007, hedge fund belongings have been as much as about $1.8 TN. Mortgage Credit had doubled in six years, with mortgage-related derivatives the epicenter of reckless leveraged hypothesis. In the 5 reflationary years ended 2007, Broker/Dealer Assets had inflated 77% to $6.167 TN. FIASCO.

The Test arrived in 2008’s fourth quarter. Even with the Bernanke Fed’s $1 TN QE, I believed the Bubble had burst. Better comprehending the character of the Fed’s reflationary technique, I started warning in early 2009 of the unfolding “global government finance Bubble.” Fed (and international central financial institution) QE and Bernanke’s inflationist rhetoric had unleashed Bubble extra on the coronary heart of worldwide finance – central financial institution Credit and authorities debt. Zero charges coerced savers into the chance markets, solely sharpening the Fed’s concentrate on making certain markets remained levitated.

Massive U.S. financial inflation and ensuing Current Account Deficits fueled Bubbles globally. China and the rising markets, specifically, confirmed sturdy inflationary biases heading into the disaster, with post-Bubble stimulus stoking myriad booms. The Fed’s QE2 financial inflation was pivotal within the spectacular progress in China’s worldwide reserve holdings – from 2007’s $1.5 TN to June 2014’s nearly $4.0 TN. “Globalization’s” inflationary heyday. China’s Bubble went to loopy extra, with fragility surfacing in 2018 and 2019.

The Fed responded to cracks in U.S. leveraged finance with one other QE program in September 2019, unleashing extra late-cycle speculative extra. Another Test was approaching. A panicked Fed responded to collapsing Bubble dynamics with unprecedented financial inflation in March 2020. Historic manias have been unleashed, together with highly effective Inflationary Dynamics. The Test was handed, however at monumental prices.

Things flip wild on the finish of cycles. In this occasion, it turned extra a case of issues going fully berserk. $5.0 TN of Fed financial inflation in two years. I had posited the Fed’s steadiness may attain $10 TN, because it accommodated a significant de-risking/deleveraging episode. Instead, belongings inflated to $9.0 TN, because the Fed stoked the climax of historical past’s biggest interval of Bubble extra.

The Big Test is coming, and there are lots of the reason why this Test is fraught with extraordinary threat. First of all, this would be the first Test the place client worth inflation is a severe concern. At this stage of a protracted Bubble cycle, solely the Fed’s steadiness sheet has the capability to function as “buyer of last resort” within the occasion of great de-risking/deleveraging. But with right this moment’s highly effective inflationary biases in client and producer costs, wages, and vitality, meals and international commodities markets, one other bout of financial inflation dangers basic inflation spiraling fully uncontrolled.

The Big Test will include a high-risk geopolitical backdrop, in contrast to something skilled throughout earlier Tests. Importantly, the confluence of worldwide battle, monetary and financial insecurities, manias and market Bubbles, and surging inflation and commodities costs isn’t any coincidence. They are all manifestations of a long time of escalating Credit Inflation and Monetary Disorder.

March 23 – Financial Times (Brooke Masters): “Russia’s invasion of Ukraine will reshape the world economy and further drive up inflation by prompting companies to pull back from their global supply chains, BlackRock chief executive Larry Fink has warned. ‘The Russian invasion of Ukraine has put an end to the globalisation we have experienced over the last three decades,’ Fink wrote… While the immediate result had been Russia’s total isolation from capital markets, Fink predicted ‘companies and governments will also be looking more broadly at their dependencies on other nations. This may lead companies to onshore or nearshore more of their operations, resulting in a faster pull back from some countries.'”

Previous Tests all transpired throughout globalization’s upcycle. The post-2008 disaster reflation was bolstered by booming China and the rising market “global locomotives.” Moreover, the massive surge in low-cost Chinese and EM manufacturing was instrumental in restraining client worth inflation within the face of huge U.S. financial stimulus. Seemingly no quantity of U.S. financial and financial stimulus may spur problematic client inflation, not with Trillions of low cost imports flowing freely.

And whereas not as discernible as “globalization”, the evolution of expertise and digitized services and products certainly additionally performed a pivotal function in sopping up huge financial stimulus. While there will likely be no finish to new applied sciences and developments, I’ll counsel that the expansion within the share of family spending allotted to “technology” could now plateau. PCs, the Internet, wi-fi, tablets and good telephones turned necessities for many households. For many, paying inflated costs for fundamentals and requirements (together with debt service) will now take priority.

March 21 – Wall Street Journal (Nick Timiraos): “Federal Reserve Chairman Jerome Powell said the central bank was prepared to raise interest rates in half-percentage-point steps and high enough to deliberately slow the economy if it concluded such steps were warranted to bring down inflation. ‘If we think it’s appropriate to raise [by a half point] at a meeting or meetings, we will do so,’ Mr. Powell said… Mr. Powell’s remarks struck a tougher tone than he used just days earlier in a press conference after the Fed voted to raise its benchmark rate by a quarter point, and he signaled a stronger bias toward lifting rates until the central bank sees clear evidence that inflation is falling to its 2% target.”

Might Powell’s “tougher tone” this week have one thing to do with the massive inventory market rally? The Fed was (as soon as once more) overly delicate to speculative market “tantrum” dynamics in its snail’s tempo lead-up to final week’s baby-step enhance. The S&P500 has rallied about 6.8% for the reason that begin of final Wednesday’s Powell press convention. And after buying and selling at 3.38% with the discharge of the FOMC assertion, the five-year Treasury “breakeven” charge of market inflation expectations is up a fast 35 bps to a file 3.73%. In a market response that should concern central financial institution officers, 10-year Treasury yields are rapidly up 30 bps to an nearly three-year excessive 2.48%. The market ended the week pricing in 8.2 25 bps charge will increase by the FOMC’s December 14th assembly.

Perhaps we’re discerning a bit nascent Big Test suggestions. General monetary situations are usually not so simply manipulated after securities markets have turned wildly speculative. And bonds have to be praying for the inventory market to relax out. At least for now, it positive seems that inflation expectations and market yields will proceed their upward trajectories as long as shares rally.

It’s value noting that the unfold between three-month T-bills and two-year Treasury yields rose one other 11 bps this week to a 20-year excessive 173 bps. Meanwhile, the 2-yr/10-yr Treasury unfold narrowed 4 bps this week to twenty bps, concerning the narrowest degree for the reason that pandemic market disaster.

Basically, long-term Treasury yields (10-yr at 2.48%) sign that inflation shouldn’t be a significant longer-term difficulty, and/or the Fed’s tightening cycle seemingly winds down inside the subsequent 12 months or so. Today, each shares and longer-term bonds are understandably skeptical of a sustained aggressive tightening cycle. And it’s this dynamic that for now helps the sufficiently free monetary situations conducive to sustained inflationary pressures.

The Bloomberg Commodities Index jumped 5.3% this week, boosting y-t-d beneficial properties to 30.9%. Crude surged $9.20, or 8.8%, to $113.90, with year-to-date beneficial properties rising to 51%. Gasoline and Natural Gas futures rose 7.1% (up 56% y-t-d) and 14.6% (up 49%). Wheat’s 3.6% advance pushed y-t-d beneficial properties to 43%. Corn rose 1.7%, Cotton 7.1%, Soybeans 2.5%, Sugar 3.6%, and Rubber 3.0%. Gold gained 1.9%, and Silver rose 2.3%.

Not solely are Fed officers now speaking 50 bps charge will increase, however the FOMC is anticipated to unveil a framework for shrinking its steadiness sheet (“quantitative tightening” or QT) on the May 4th assembly. Understandably, there are mounting market liquidity issues. Reuters: “Analysis: U.S. Treasury Market Pain Amplifies Worry About Liquidity.” Bloomberg: “Commodity Traders Sound Alarm on Plunging Market Liquidity.” And whereas liquidity seems ample whereas equities are advancing, the wildness lies in wait. That all markets – fixed-income, equities, commodities and currencies – may concurrently undergo liquidity points is what makes The Big Test so daunting. Market Structure threat – notably with regard to speculative leverage, the ETF advanced, by-product market fragilities and trend-following flows – compounded following every earlier Test.

Ominously, The Big Test will even unfold as China’s historic Bubble deflates. Despite a sequence of bulletins from Beijing, there was little abatement of Crisis Dynamics. Bad information continues to pile up for the builders. With yields for essentially the most half reversing greater this week, the developer bond rally has been each quick and unimpressive. Moreover, the week was notable for jumps in CDS costs for the 4 main Chinese banks. And China sovereign CDS gained eight bps this week to 63 bps, beneath the 71 bps excessive from Tuesday the fifteenth, however up considerably from the 40 bps to begin the 12 months. The Shanghai Composite declined 1.2% this week, boosting its y-t-d drop to 11.7%. The growth-oriented ChiNext Index sank 2.8% (down 20.6% y-t-d).

March 25 – Bloomberg (David Qu): “China’s widening coronavirus outbreak is putting increasing strain on the economy, according to high-frequency data. As of March 23, 21 provinces contained high- or medium-risk regions — accounting for 77.5% of GDP — up from 17 provinces (71% of GDP) a week earlier. Between March 17-23, China reported an average of 2,147 domestic Covid-19 cases per day, almost triple the count in the first half of the month. On the demand side, car sales remained below the pre-pandemic level for a third week in a row in the week to March 18. Home sales in 50 major cities widened their year-on-year decline in the second week of March.”

Between actual property stress, Covid lockdowns, waning financial vigor, and China’s associate’s ruthless invasion of Ukraine, Chinese households have good motive to query whether or not Beijing’s competence and capabilities have been blown out of proportion for too lengthy.

The Russia/Ukraine War is in methods harking back to the early pandemic days: clearly history-changing with far-reaching however unknowable ramifications. Beijing will feign the center street for so long as doable, however I’m skeptical China will get by way of this unscathed. The world is now swiftly repositioning for the brand new “Iron Curtain” international backdrop. At the minimal, nations will likely be pressured to answer probably extremely problematic disruptions to vitality and meals provides. The chance of panic shopping for and broad-based provide points all through the commodities advanced shouldn’t be low. And it is tough to see how already troubled international provide chain points do not get even worse – even when geopolitical conflicts do not escalate.

March 20 – Financial Times (Chris Flood): “International investors are bracing themselves for a wave of defaults on Russian debt repayments, as the Kremlin tightens its grip over the country’s financial system following its invasion of Ukraine. Russia’s total debt owed to foreigners stood at $490bn at the end of September, according to the Central Bank of Russia. But just how much of that exposure – spread across bonds, loans, direct investments and trade credits – will be wiped out is the thorny question confronting international investors. Foreigners own $20bn of the $39.6bn in Russia’s outstanding ‘hard currency’ sovereign debt, issued via dollar and euro-denominated bonds. These have plunged in value as the war in Ukraine has escalated.”

While commodities markets have rapidly begun to adapt to new realities, monetary markets are gradual to understand momentous longer-term ramifications. “Russia’s total debt owed to foreigners stood at $490bn…” So far, Russia seems to favor protecting its choices open (making some debt funds). But count on a livid Russian management to resolutely actual revenge – in any approach it may possibly.

It’s tough to envisage a better threat backdrop for The Big Test. Not surprisingly, the extremely speculative inventory market is struggling to successfully modify to the quickly deteriorating backdrop (i.e. tightening cycle, fragile Bubbles, geopolitical threat, China, and so on.), solely elevating the chance of disorderly adjustment/dislocation.

Over the previous decade, Bubble Dynamics enveloped the world – in a blow-off dynamic to conclude a multi-decade experiment in unfettered international Credit and central financial institution inflationism, together with market and financial construction. As such, there is a distinct risk that The Big Test will likely be extra globally systemic – the U.S., China, Europe and EM all succumbing concurrently to Crisis Dynamics.

I see The Big Test denoting the “official” conclusion to a multi-decade increase interval. From my analytical perspective, it has at all times been a case of a historic “global government finance Bubble” ultimately culminating in a disaster of confidence in authorities finance and policymaking. Most regrettably, there will likely be an unavoidable day of reckoning for such reckless inflation of perceived monetary wealth. The Federal Reserve has actually finished about all the pieces doable to corrode confidence in a public establishment of such very important significance. Waning confidence in Beijing is at this level nearly palpable. In Europe, the ECB’s cussed dovish stance on inflation is sort of laughable – and positively pathetic. Moreover, the world right this moment faces maybe the best geopolitical disaster since WWII. Trying to be goal, it positive seems issues are coming to a head.

For the Week:

The S&P500 rose 1.8% (down 4.7% y-t-d), and the Dow elevated 0.3% (down 4.1%). The Utilities surged 3.5% (up 0.8%). The Banks gained 1.1% (down 0.7%), and the Broker/Dealers elevated 0.4% (down 1.3%). The Transports declined 0.7% (down 0.6%). The S&P 400 Midcaps gained 0.2% (down 4.6%), whereas the small cap Russell 2000 fell 0.4% (down 7.5%). The Nasdaq100 rose 2.3% (down 9.6%). The Semiconductors jumped 2.7% (down 10.7%). The Biotechs declined 1.1% (down 8.9%). With bullion recovering $37, the HUI gold index rallied 3.5% (up 21.6%).

Three-month Treasury invoice charges ended the week at 0.5125%. Two-year authorities yields jumped 33 bps to 2.27% (up 154bps y-t-d). Five-year T-note yields surged 40 bps to 2.55% (up 128bps). Ten-year Treasury yields rose 33 bps to 2.48% (up 97bps). Long bond yields gained 16 bps to 2.59% (up 68bps). Benchmark Fannie Mae MBS yields spiked 47 bps to three.71% (up 164bps) – the excessive since December 2018.

Greek 10-year yields jumped 17 bps to 2.80% (up 148bps y-t-d). Ten-year Portuguese yields rose 15 bps to 1.33% (up 86bps). Italian 10-year yields surged 19 bps to 2.08% (up 91bps). Spain’s 10-year yields gained 13 bps to 1.44% (up 88bps). German bund yields surged 21 bps to 0.59% (up 76bps). French yields jumped 19 bps to 1.02% (up 82bps). The French to German 10-year bond unfold narrowed about two to 47 bps. U.Okay. 10-year gilt yields surged 20 bps to 1.70% (up 72bps). U.Okay.’s FTSE equities index rose 1.1% (up 1.3% y-t-d).

Japan’s Nikkei Equities Index surged 4.9% (down 2.2% y-t-d). Japanese 10-year “JGB” yields added three bps to 0.24% (up 17bps y-t-d). France’s CAC40 fell 1.0% (down 8.4%). The German DAX equities index declined 0.7% (down 9.9%). Spain’s IBEX 35 equities index misplaced 1.0% (down 4.4%). Italy’s FTSE MIB index gained 1.4% (down 10.2%). EM equities have been blended. Brazil’s Bovespa index surged 3.3% (up 13.6%), whereas Mexico’s Bolsa index was unchanged (up 4.1%). South Korea’s Kospi index gained 0.8% (down 8.3%). India’s Sensex equities index fell 0.9% (down 1.5%). China’s Shanghai Exchange declined 1.1% (down 11.7%). Turkey’s Borsa Istanbul National 100 index added 1.5% (up 17.1%). Russia’s MICEX equities index elevated 0.6% in renewed buying and selling (down 34.4%).

Investment-grade bond funds noticed inflows of $209 million, whereas junk bond funds posted unfavorable flows of $2.698 billion (from Lipper).

Federal Reserve Credit final week expanded $28.7bn to a file $8.924 TN. Over the previous 132 weeks, Fed Credit expanded $5.198 TN, or 139%. Fed Credit inflated $6.113 Trillion, or 217%, over the previous 489 weeks. Elsewhere, Fed holdings for overseas homeowners of Treasury, Agency Debt final week rose $15.5bn to $3.450 TN. “Custody holdings” have been down $116bn, or 3.3%, y-o-y.

Total cash market fund belongings added $2.0bn to $4.561 TN. Total cash funds elevated $113bn y-o-y, or 2.5%.

Total Commercial Paper jumped $32.7bn to $1.050 TN. CP was down $83bn, or 7.3%, over the previous 12 months.

Freddie Mac 30-year fastened mortgage charges surged 26 bps to a greater than three-year excessive 4.42% (up 125bps y-o-y). Fifteen-year charges jumped 24 bps to three.63% (up 118bps). Five-year hybrid ARM charges rose 17 bps to three.36% (up 52bps). Bankrate’s survey of jumbo mortgage borrowing prices had 30-year fastened charges up two bps to 4.52% (up 127bps) – the excessive since December 2018.

Currency Watch:

For the week, the U.S. Dollar Index elevated 0.6% to 98.79 (up 3.3% y-t-d). For the week on the upside, the Brazilian actual elevated 5.9%, the South African rand 2.9%, the Mexican peso 1.6%, the Norwegian krone 1.6%, the Australian greenback 1.4%, the Canadian greenback 1.0%, the New Zealand greenback 0.9%, and the Swiss franc 0.2%. On the draw back, the Japanese yen declined 2.4%, the South Korean gained 0.9%, the euro 0.6%, and the Singapore greenback 0.1%. The Chinese renminbi slipped 0.08% versus the greenback (down 0.16% y-t-d).

Commodities Watch:

March 22 – Bloomberg (Sybilla Gross): “Brent oil will likely hit $150 a barrel this year as the supply shock from the war in Europe coincides with resilient demand from people keen to travel after the virus, according to veteran commodities trader Doug King. The world has few options to pump more crude, and there’s little sign that consumption is under threat, said King, who runs the $425 million Merchant Commodity Fund…”

The Bloomberg Commodities Index surged 5.3% (up 30.9% y-t-d). Spot Gold rallied 1.9% to $1,958 (up 7.1%). Silver recovered 2.3% to $25.53 (up 9.5%). WTI crude surged $9.20 to $113.90 (up 51%). Gasoline inflated 7.1% (up 56%), and Natural Gas spiked 14.6% (up 49%). Copper declined 0.9% (up 5%). Wheat jumped 3.6% (up 43%), and Corn gained 1.7% (up 27%). Bitcoin rose $2,611, or 6.2%, this week to $44,396 (down 4%).

Russia/Ukraine Watch:

March 21 – Reuters (Lefteris Papadimas and Vassilis Triandafyllou): “Greece’s consul general in Mariupol, the last EU diplomat to evacuate the besieged Ukrainian port, said on Sunday the city was joining the ranks of places known for having been destroyed in wars of the past… ‘What I saw, I hope no one will ever see,’ [Manolis] Androulakis said as he arrived on Sunday at Athens International Airport and was reunited with his family. ‘Mariupol will become part of a list of cities that were completely destroyed by war; I don’t need to name them- they are Guernica, Coventry, Aleppo, Grozny, Leningrad,’ Androulakis said.”

March 21 – Associated Press (Cara Anna): “As Mariupol’s defenders held out Monday against Russian demands that they surrender, the number of bodies in the rubble of the bombarded and encircled Ukrainian city remained shrouded in uncertainty, the full extent of the horror not yet known. With communications crippled, movement restricted and many residents in hiding, the fate of those inside an art school flattened on Sunday and a theater that was blown apart four days earlier was unclear. More than 1,300 people were believed to be sheltering in the theater, and 400 were estimated to have been in the art school.”

March 21 – Reuters (Natalia Zinets): “President Volodymyr Zelenskiy said… Ukraine would never bow to ultimatums from Russia and cities such as Kyiv, Mariupol or Kharkiv would not accept Russian occupation. ‘We have an ultimatum with points in it. ‘Follow it and then we will end the war’,’ Zelenskiy said in an interview published by Ukrainian public broadcasting company Suspilne. ‘Ukraine cannot fulfill the ultimatum.'”

March 25 – Reuters (Natalia Zinets and Maria Starkova): “Moscow signalled on Friday it was scaling back its ambitions in Ukraine to focus on territory claimed by Russian-backed separatists in the East as Ukrainian forces went on the offensive to recapture towns outside the capital Kyiv. In an announcement that appeared to indicate more limited goals, the Russian Defence Ministry said a first phase of its operation was mostly complete and it would now focus on the eastern Donbass region, which has pro-Russia separatist enclaves.”

March 19 – BBC: “Russia’s military has fired a hypersonic ballistic missile and destroyed a big underground arms depot in western Ukraine, the defence ministry in Moscow has said. If confirmed it would be Russia’s first use in this war of the Kinzhal, or Dagger, ballistic missile launched from the air, most likely by a MiG-31 warplane.”

March 24 – Reuters (Jarrett Renshaw and Sabine Siebold): “The United States and its allies are working on supporting Ukraine with anti-ship missiles, a senior U.S. administration official said… ‘We have started consulting with allies on providing anti-ship missiles to Ukraine,’ the official said on the sidelines of the NATO summit in Brussels. ‘There may be some technical challenges with making that happen but that is something that we are consulting with allies and starting to work on.'”

March 23 – Reuters (Anna Wlodarczak-Semczuk, Joanna Plucinska, Alicja Ptak, Pawel Florkiewicz, Karol Badohal and Alan Charlish): “Poland is expelling 45 Russian diplomats suspected of working for Russian intelligence, the foreign ministry said… Russia said the accusations were baseless. Relations between Russia and Central European countries that once formed part of its sphere of influence have long been fraught but the invasion of Ukraine has significantly increased fear and suspicion about Moscow’s intentions.”

Economic War/Iron Curtain Watch:

March 23 – Financial Times (Brooke Masters): “Russia’s invasion of Ukraine will reshape the world economy and further drive up inflation by prompting companies to pull back from their global supply chains, BlackRock chief executive Larry Fink has warned. ‘The Russian invasion of Ukraine has put an end to the globalisation we have experienced over the last three decades,’ Fink wrote… While the immediate result had been Russia’s total isolation from capital markets, Fink predicted ‘companies and governments will also be looking more broadly at their dependencies on other nations. This may lead companies to onshore or nearshore more of their operations, resulting in a faster pull back from some countries.'”

March 24 – Reuters (Jarrett Renshaw, Vera Eckert and Joseph Nasr): “It is ‘foolish’ to believe that Western sanctions against Russian businesses could have any effect on the Moscow government, Russian ex-president and deputy head of security council Dmitry Medvedev was quoted as saying… The sanctions will only consolidate the Russian society and not cause popular discontent with the authorities, Medvedev told Russia’s RIA news agency…”

March 22 – Bloomberg: “Russia plans to demand ruble payments for natural gas purchases from European nations, deepening its standoff with the west and potentially aggravating Europe’s worst energy crunch since the 1970s. Gas prices surged more 30% after President Vladimir Putin ordered the central bank to develop a mechanism to make ruble payments for natural gas within a week at a meeting with his government. Putin’s move showed a growing willingness on both sides to use Russian energy supplies as a weapon in the struggle between Moscow and the west over the war in Ukraine. The specifics of the new arrangement weren’t immediately clear, but by demanding payments in rubles, Putin is essentially forcing European companies to directly prop up his currency after it was sent into free-fall by sanctions placed on the Russian economy.”

March 25 – Reuters (Jarrett Renshaw, Vera Eckert and Joseph Nasr): “The United States will work to supply 15 billion cubic metres of liquefied natural gas (LNG) to the European Union this year to help it wean off Russian energy supplies… The EU is aiming to cut its dependency on Russian gas by two-thirds this year and end all Russian fossil fuel imports by 2027 due to Russia’s invasion of Ukraine. Russia supplies around 40% of Europe’s gas needs. Concerns over security of supply were reinforced this week after Russia ordered the switch of gas contract payments to roubles…”

March 23 – Reuters (Karin Strohecker and Marc Jones): “Russian holders of domestic corporate Eurobonds face delays in receiving payments settled through international agents, as transactions get snarled up by sanctions, Russia’s National Settlement Depository (NSD), companies and analysts said. Western sanctions and countersanctions by Moscow mean that the payment process on hard currency bonds issued by Russia or Russian companies has become much more complicated, with some payments delayed or getting stuck in transit.”

March 24 – Bloomberg (Ye Xie and Maria Elena Vizcaino): “China has seen investors pull money out of the country on an ‘unprecedented’ scale since Russia invaded Ukraine in late February, marking a ‘very unusual’ shift in global capital flows in emerging markets, according to the Institute of International Finance. High-frequency data detected large portfolio outflows from Chinese stocks and bonds… ‘Outflows from China on the scale and intensity we are seeing are unprecedented, especially since we are not seeing similar outflows from the rest of emerging markets,’ IIF chief economist Robin Brooks and his colleagues wrote. ‘The timing of outflows — which built after Russia’s invasion of Ukraine — suggests foreign investors may be looking at China in a new light, though it is premature to draw any definitive conclusions in this regard.'”

March 23 – Bloomberg (Harry Wilson, Matthew Boyle, and Srinivasan Sivabalan): “For decades, global finance firms eagerly catered to Russian firms, billionaires and the government. Then tanks started rolling into Ukraine. Citigroup Inc., which has thousands of staff and billions of dollars of assets in Russia, has said it will cut back much of its business in the country. Goldman Sachs…, JPMorgan… and Deutsche Bank AG are also heading for the exit… They’re being followed by lawyers and other professionals. It’s perhaps the harshest and fastest exclusion in living memory of a major industrialized economy. The past few weeks have been a frantic dash to understand and implement sanctions that are being continually updated by jurisdictions including the U.S., U.K. and the European Union… A dozen lenders including Raiffeisen Bank International AG, Citigroup and Deutsche Bank have about $100 billion of combined exposure to Russia…”

March 23 – Bloomberg: “China’s oil refiners are discreetly purchasing cheap Russian crude as the nation’s supply continues to seep into the market. Unlike India’s state-run oil refiners, which have issued a number of tenders seeking to buy Russia’s flagship Urals crude among other grades, traders say China’s state processors are negotiating privately under the radar with sellers.”

March 23 – Bloomberg: “Russian steelmaker Severstal appears to have missed a Wednesday deadline to make good on a $12.6 million interest payment to bondholders. The money was originally due to creditors by March 16, but paying and transfer agent Citigroup Inc. wouldn’t remit the cash without the company receiving express permission from the U.S. Treasury. With a five-day grace period now expired, there’s been no sign that the payment has been passed on.”

March 21 – Bloomberg (Sydney Maki): “S&P Global Ratings is withdrawing its credit grades on Russian entities after the European Union’s decision last week to ban firms from providing ratings to companies established in the country. The withdrawal will take place before the April 15 deadline imposed by the EU, analysts Michelle James and Arnaud Humblot wrote… It comes after the rating company suspended commercial operations in the country following Russia’s invasion of Ukraine.”

March 23 – Bloomberg (Siddharth Philip and Eliza Ronalds-Hannon): “Russia’s move to transfer almost 800 foreign-owned jets to its own aircraft register amid foreign sanctions has triggered a wave of insurance claims from leasing firms whose fleets have effectively been commandeered. Lessors will assert that registering the planes in Russia when they’re already on the books in other territories amounts to a qualifying event for claims, including under their war-risk policies…”

U.S./Russia Watch:

March 25 – Bloomberg: “Russian Foreign Minister Sergei Lavrov accused the West of waging ‘hybrid war, a total war’ through sanctions against his country. European leaders want to ‘destroy, strangle the Russian economy and Russia as a whole,’ Lavrov told a meeting… Russia has no intention of being isolated and has ‘many friends, allies, partners in the world’ that it will continue to work with, Lavrov said.”

March 22 – ABC News (Luke Barr): “FBI Director Christopher Wray said… the FBI is ‘concerned’ with the possibility of Russian cyberattacks against critical U.S. infrastructure in the wake of Russia’s war with Ukraine. ‘The reason we’re concerned about it is not just based on our longstanding understanding of how the Russians operate, but it’s actually the product of specific investigative work and surveillance work that we’ve been doing all together… Most cyberattacks don’t just happen in an instant. There’s activity that leads up to it. There’s scanning and researching, researching a victim, scanning for vulnerabilities and systems. There’s developing access to those systems. So, there’s a whole range of preparatory work, which is what we’ve been seeing,’ he said.”

China/Russia/U.S. Watch:

March 19 – Reuters: “China stands on the right side of history over the Ukraine crisis as time will tell, and its position is in line with the wishes of most countries, Chinese Foreign Minister Wang Yi said. ‘China will never accept any external coercion or pressure, and opposes any unfounded accusations and suspicions against China,’ Wang told reporters…”

March 20 – The Hill (Joseph Choi): “China’s ambassador to the U.S. on Sunday avoided saying Beijing would not sell military supplies and weapons to Russia, insisting that it would maintain ‘normal’ trade relations with one of its closest allies. Host Margaret Brennan pressed Qin Gang during an appearance on CBS’s ‘Face the Nation’ on whether China would join in the West’s economic campaign to end Russia’s attack on Ukraine. She specifically asked if China would stop sending military and financial support to Russia. Qin called suggestions that China was providing military assistance to Russia ‘disinformation.'”

March 24 – Bloomberg: “Chinese President Xi Jinping has held a flurry of talks with state leaders, including Vladimir Putin, since Russia’s invasion in Ukraine. But there’s one big omission from his diplomatic outreach: Volodymyr Zelenskiy. Xi has spoken with at least eight world leaders in the month since the invasion, stressing Beijing’s preference for dialogue over war and sanctions. The leader of the world’s second-largest economy has encouraged Russia to move toward negotiations, offered to work with France and Germany to promote talks and told President Joe Biden that China ‘stands for peace.’ When asked Wednesday why Xi hadn’t spoken with Zelenskiy, Foreign Ministry spokesman Wang Wenbin told a regular news briefing that China had ‘smooth communications’ on the Ukraine issue. ‘China supports all parties to uphold the concept of indivisibility of security,’ Wang said.”

March 24 – Bloomberg: “Xi Jinping and Vladimir Putin declared a ‘no limits’ friendship between China and Russia before the Olympics began. Two months and a war later, Beijing’s envoy to the U.S. has added an important caveat. ‘China and Russia’s cooperation has no forbidden areas, but it has a bottom line,’ Ambassador Qin Gang told state-backed broadcaster Phoenix TV… ‘That line is the tenets and principles of the United Nations Charter, the recognized basic norms of international law and international relations.’ ‘This is the guideline we follow in bilateral relations between China and any other country,’ Qin added, responding to a question about Beijing’s commitment to Moscow…”

March 19 – Reuters (Ryan Woo): “A senior Chinese government official said… sanctions imposed by Western nations on Russia over Ukraine are increasingly ‘outrageous’. Vice Foreign Minister Le Yucheng also acknowledged Moscow’s point of view on NATO, saying the alliance should not further expand eastwards, forcing a nuclear power like Russia ‘into a corner’. China has yet to condemn Russia’s action in Ukraine or call it an invasion, though it has expressed deep concern about the war. Beijing has also opposed economic sanctions on Russia over Ukraine…”

March 18 – Politico (Phelim Kine): “President Joe Biden’s two-hour video call with China’s President Xi Jinping on Friday exposed a deepening divide between the leaders’ positions on both the Russian invasion of Ukraine and China’s claims to Taiwan. Biden’s outreach failed to prod Xi to commit to leveraging Chinese influence to end Russia’s aggression in Ukraine or to even use the term ‘invasion.’ The call instead provoked Xi’s implicit criticism of the alleged U.S. role in fomenting the crisis, perceived U.S. meddling in Taiwan and bitterness toward threatened U.S. sanctions against China if it aids Russia’s war effort.”

March 23 – Washington Post (John Hudson): “Repeated attempts by the United States’ top defense and military leaders to speak with their Russian counterparts have been rejected by Moscow for the last month, leaving the world’s two largest nuclear powers in the dark about explanations for military movements and raising fears of a major miscalculation or battlefield accident.”

March 22 – Bloomberg: “China’s top Russia envoy urged Chinese business people in Moscow to seize economic opportunities created by the crisis, a strategy that could help soften the blow from international sanctions. Ambassador Zhang Hanhui… told about a dozen business heads to waste no time and ‘fill the void’ in the local market, the Russia Confucius Culture Promotion Association said… While the summary made no mention of sanctions or sanctions compliance, Zhang described the situation as an opportunity.”

Europe/Russia/China Watch:

March 21 – Wall Street Journal (Laurence Norman and Georgi Kantchev): “Support for a European Union-wide ban on the purchase of Russian oil is growing inside the bloc, according to diplomats involved…, representing a significant shift in the continent’s stance toward how to ratchet up economic pressure on Moscow. Agreement on any EU ban of Russian crude is far from locked in yet, and a rapid decision to move ahead isn’t likely, diplomats said. Brussels has been willing to unleash severe economic sanctions against Russia for its invasion of Ukraine, despite the risk that those measures could have repercussions for European countries whose economies are more intertwined with Russia.”

March 22 – Financial Times (Derek Brower, Myles McCormick, Justin Jacobs and Nastassia Astrasheuskaya): “Russia is throttling capacity on a major pipeline that sends crude oil to global markets, driving prices higher and raising fears that Moscow was prepared to retaliate against western sanctions by curbing its own energy supplies. Up to 1mn barrels a day of oil shipped through the Caspian Pipeline Consortium’s pipeline from central Asia to the Black Sea could be cut for up to two months while repairs are made to storm-damaged loading facilities, Russia’s deputy energy minister said… The supply interruption comes on the eve of US president Joe Biden’s trip to Europe, where EU countries are expected to discuss imposing sanctions on Russia’s oil sector…”

March 24 – Reuters (Jarrett Renshaw, Vera Eckert and Joseph Nasr): “Russia accused Poland… of trying to destroy bilateral relations by expelling 45 of its diplomats, and said it would respond harshly. The Russian ambassador said Poland, which said… it was expelling the diplomats on suspicion of working for Russian intelligence, had also blocked the embassy’s bank accounts. The Russian foreign ministry said the expulsions were ‘a conscious step towards the final destruction of bilateral relations, the dismantling of which our Polish ‘partners’ have been systematically carrying out for a long time’.”

March 24 – Bloomberg (Chiara Albanese): “European Union officials suspect that China may be ready to supply semiconductors and other tech hardware to Russia as part of an effort to soften the impact of sanctions imposed over the invasion of Ukraine. The EU is concerned that China is ready to help President Vladimir Putin’s government weather the economic penalties it has put in place along with the U.S., the U.K. and Japan with particular focus on the availability of high-tech components, according to two people with knowledge…”

Market Instability Watch:

March 23 – Bloomberg (Greg Ritchie and Finbarr Flynn): “Global bond markets have suffered unprecedented losses since peaking last year, as central banks including the Federal Reserve look to tighten policy to combat surging inflation. The Bloomberg Global Aggregate Index, a benchmark for government and corporate debt total returns, has fallen 11% from a high in January 2021. That’s the biggest decline from a peak in data stretching back to 1990, surpassing a 10.8% drawdown during the financial crisis in 2008. It equates to a drop in the index market value of about $2.6 trillion, worse than about $2 trillion in 2008.”

March 24 – Reuters (Davide Barbuscia and Ira Iosebashvili): “A sharp sell-off in U.S. Treasuries has increased concerns about low levels of liquidity in the $23.5 trillion market, potentially amplifying losses for investors which already had a dire start to the year… While liquidity in the U.S. Treasury market has been an ongoing issue, traders and investors said there had been particular concerns during this sell-off. ‘People who buy longer-dated Treasuries, such as pensions, central banks and insurance companies, tend to stay away when you have this type of volatility,’ said Ed Al-Hussainy, senior rates and currency analyst at Columbia Threadneedle, adding that liquidity ‘is not good’ and that trading big blocks of Treasuries ‘has become very difficult.'”

March 24 – Bloomberg (Liz Capo McCormick and Michael MacKenzie): “A fresh wave of volatility threatens the battered U.S. Treasury market — and this time it’s all thanks to the Federal Reserve’s ambitious bid to shrink its $9 trillion balance sheet just as it raises interest rates. In less than two weeks, the U.S. central bank is expected to lay out a template for the process known as quantitative tightening, with Fed Chair Jerome Powell signaling the final plan may be unveiled on May 4. Powell has telegraphed a faster pace of QT is coming than the 2017-2019 episode — the market’s only previous experience with a Fed on a mission to pare asset holdings.”

March 23 – Bloomberg (Michael MacKenzie): “The Treasury 10-year yield is on the verge of breaching a downward trend line that characterized the bond bull market for decades. Since the 1980s, the benchmark yield has pushed up against the long-term trajectory in 1990, 1994, 2000, 2007 and in late 2018, only to reverse course and head lower. The test is resuming after the recent selloff pushed 10-year yields above 2.40% on Wednesday, from 1.51% at the end of last year. The ‘market selloff is testing long-term lines that have defined a bull market for decades,’ Paul Ciana, a technical strategist at Bank of America Corp., wrote…”

March 21 – Financial Times (Kate Duguid and Eric Platt): “Raising cash on Wall Street is becoming increasingly difficult as market gyrations close the door on big initial public offerings and the Federal Reserve’s turn to a more restrictive monetary policy forces companies to pay up to borrow through debt markets. The dramatic tightening of financial conditions over the past three months has accompanied violent swings in stock, bond and Treasury securities. The price moves have inflicted losses on fund managers and sapped some of the speculative energy from US financial markets. Borrowing costs for companies and individuals have been rising since late December…”

March 24 – Bloomberg (Archie Hunter and William Mathis): “Whipsawing commodity prices and eye-watering margin calls are forcing traders to reduce their activity, driving liquidity out of markets and exacerbating price swings, according to some of the world’s biggest trading houses. ‘We’re seeing clearly that liquidity in terms of being able to find buyers and sellers in distressed or highly volatile markets is becoming less,’ Engelhart Commodities Trading Partners Chairman and Chief Executive Officer Huw Jenkins said…”

March 22 – Bloomberg (John McCorry and Jonathan Ferro): “Given Mohamed El-Erian’s prescience on inflation, investors may want to hear what he says about the stock market. ‘If I’m investing over the next 12-month horizon, I would reduce equities at this point. I would take some money off the table,’ the bond market veteran told Bloomberg… ‘The market is giving you a wonderful opportunity to come out.” ‘I do not assume the market has factored in but what is going on to occur to the financial system,’ he mentioned… ‘The Fed is more and more being pressured to think about what’s the least unhealthy coverage mistake it needs to be remembered for: assembly its inflation goal by inflicting a recession, or permitting excessive and probably destabilizing inflation to persist effectively into 2023…'”

Derivatives Watch:

March 22 – Bloomberg (Sam Potter): “Add one other leveraged nickel commerce to the lengthy checklist of wipeouts within the historic turmoil rocking the steel. Just two weeks after its bearish sibling was shuttered, the WisdomTree Nickel 3x Daily Leveraged exchange-traded commodity (ticker 3NIL) is being compulsorily redeemed, issuer WisdomTree Investments mentioned… The London and Milan-listed product, which used swaps to treble the return of nickel futures, had at one level surged greater than 600% this month earlier than the London Metal Exchange controversially halted buying and selling within the steel. When the market ultimately reopened March 16, nickel fell by essentially the most allowed for 4 days in a row — delivering a deadly blow to 3NIL.”

Inflation Watch:

March 19 – Bloomberg (Elizabeth Elkin, Pratik Parija and Tarso Veloso Ribeiro): “The worth of all the pieces that goes into producing crops is surging, threatening to additional fan international meals inflation. Food manufacturing prices have been already excessive. The pandemic snarled provide chains, making it tougher – and costly – to get elements and provides which might be very important for rising crops. Then Russia’s invasion of Ukraine took issues to a different degree, sending markets hovering for fertilizers and for the fuels wanted to run farm equipment. Inflation is so rampant that even with rising meals costs, farmers are going through more and more robust margins.”

March 21 – Wall Street Journal (Collin Eaton): “American frackers are elevating the variety of drilling rigs in oil fields by greater than 20%, however do not count on a equally sized enhance in manufacturing. Though the variety of energetic U.S. oil-directed rigs has grown by roughly one-fifth previously six months, a lot of the brand new exercise is to make up for a depleted stock of wells drilled earlier than the pandemic, executives mentioned. Frackers introduced the perfect of these on-line final 12 months as an alternative of drilling new ones and must drill greater than traditional this 12 months to offset these misplaced wells. Following calls by the Biden administration and others to lift manufacturing and assist quell rising oil costs following Russia’s invasion of Ukraine, shale executives have pointed to numerous bottlenecks that restrict their means to extend manufacturing rapidly this 12 months, together with supply-chain points, cautious buyers and limits to their remaining drilling stock.”

March 22 – Reuters (Tom Polansek and Ana Mano): “Sky-high fertilizer costs have farmers worldwide scaling again its use and lowering the quantity of land they’re planting, fallout from the Ukraine-Russia battle that has some agricultural trade veterans warning of meals shortages. Western sanctions on Russia, a significant exporter of potash, ammonia, urea and different soil vitamins, have disrupted shipments of these key inputs across the globe. Fertilizer is essential to protecting corn, soy, rice and wheat yields excessive. Growers are scrambling to regulate.”

March 22 – Bloomberg: “More excessive climate attributable to rising international temperatures – compounded by geopolitical turmoil and the pandemic – is hindering China’s effort to make sure meals provides for its 1.4 billion inhabitants. President Xi Jinping has made meals safety a precedence for the world’s second-biggest financial system, an effort to satisfy the hovering demand that is pushed imports of corn, soybeans and wheat to file ranges, making Beijing more and more weak to commerce tensions and provide shocks.”

Biden Administration Watch:

March 21 – Bloomberg (Katrina Manson, Justin Sink and Jennifer A. Dlouhy): “President Joe Biden warned… about new indications of doable Russian cyberattacks, pumping up the amount on weeks of rising concern a few doable Kremlin-ordered response to crushing sanctions over the invasion of Ukraine. Biden reiterated these warnings, prompted by what he referred to as ‘evolving intelligence that the Russian authorities is exploring choices for potential cyberattacks.’ He urged the the U.S. personal sector: ‘Harden your cyber protection instantly.'”

March 23 – Reuters (Jarrett Renshaw and Trevor Hunnicutt): “The Biden administration, looking for to discourage China from aiding sanctions-hit Russia, on Wednesday warned Beijing to not make the most of enterprise alternatives created by sanctions, assist Moscow evade export controls or course of its banned monetary transactions. White House nationwide safety adviser Jake Sullivan informed reporters that G7 international locations would quickly announce a unified response to verify Russia can’t evade Western sanctions imposed over its invasion of Ukraine with the assistance of China or every other nation.”

March 22 – Reuters (Yew Lun Tian): “The United States ought to instantly revoke visa curbs on Chinese officers or face reciprocal countermeasures, the Chinese overseas ministry mentioned… The United States is proscribing visas of Chinese officers for involvement in ‘repressive acts’ towards ethnic and spiritual minority teams, Secretary of State Antony Blinken mentioned on Monday.”

March 24 – Reuters (David Lawder, Andrea Shalal, Xu Jing and Ellen Zhang): “The U.S. Trade Representative’s workplace mentioned… it has reinstated 352 expired product exclusions from U.S. ‘Section 301’ tariffs on Chinese imports, effectively in need of the 549 exclusions that it was beforehand contemplating. The reinstated product exclusions will likely be efficient retroactively from Oct. 12, 2021, and lengthen by way of Dec. 31, 2022, USTR mentioned. They cowl a variety of the initially estimated $370 billion value of Chinese imports that former president Donald Trump hit with punitive tariffs of seven.5% to 25%.”

Federal Reserve Watch:

March 21 – Bloomberg (Craig Torres): “Federal Reserve Chair Jerome Powell mentioned the central financial institution is ready to lift rates of interest by a half percentage-point at its subsequent assembly if wanted, deploying a extra aggressive tone towards curbing inflation than he used only a few days earlier. ‘If we conclude that it’s acceptable to maneuver extra aggressively by elevating the federal funds charge by greater than 25 bps at a gathering or conferences, we are going to accomplish that,’ Powell mentioned in a speech titled ‘Restoring Price Stability’… Following his formal remarks, Powell was requested by the moderator if there was something stopping coverage makers from climbing by a half level in May, which might be the primary enhance of that magnitude since 2000. ‘What would forestall us? Nothing: Executive abstract,’ he mentioned, drawing laughs from the viewers. He added that such a choice had not been made, however acknowledged it was doable if warranted by incoming knowledge.”

March 22 – Bloomberg (Steve Matthews): “Federal Reserve Bank of St. Louis President James Bullard mentioned U.S. financial coverage must be tightened rapidly to cease placing upward strain on inflation that’s already too excessive, reiterating his name for rates of interest to rise above 3% this 12 months. ‘The Fed wants to maneuver aggressively to maintain inflation beneath management,’ Bullard mentioned… ‘We have to get to impartial at the very least so we’re not placing upward strain on inflation throughout this era when we now have a lot greater inflation than we’re used to within the U.S.'”

March 23 – Bloomberg (Olivia Rockeman): “Federal Reserve Bank of Cleveland President Loretta Mester says she helps front-loading interest-rate will increase this 12 months, seemingly together with some half percentage-point hikes, to curb the most well liked inflation in 4 a long time. ‘I believe we’ll have to do some 50 bps strikes,’ Mester mentioned…”

March 21 – Bloomberg (Enda Curran): “Goldman Sachs Group Inc.’s economists now count on the Federal Reserve to lift rates of interest by 50 bps at each its May and June coverage conferences. Economists led by Jan Hatzius mentioned the Fed will seemingly increase by 25 bps within the 4 remaining conferences within the second half of the 12 months, with three quarterly hikes within the first 9 months of 2023. The change of forecast by Goldman follows a speech and feedback Monday by Fed Chair Jerome Powell…”

U.S. Bubble Watch:

March 24 – Yahoo Finance (Emily McCormick): “At 187,000, new jobless claims improved for a back-to-back week and reached the bottom degree since September 1969. Continuing claims additionally fell additional to succeed in 1.35 million – the least since January 1970. The labor market has remained some extent of energy within the U.S. financial system, with job openings nonetheless elevated however coming down from file ranges as extra employees rejoin the labor drive from the sidelines.”

March 25 – Bloomberg (Prashant Gopal): “The U.S. housing increase is creating a brand new class of actual property tycoons with a simple supply of financing: their very own houses. Soaring costs have showered property homeowners with file fairness windfalls, sending cash-out refinancings to ranges not seen for the reason that peak of mid-2000s housing frenzy. For some folks, meaning money for a transform or trip. But others are placing that cash to work by shopping for second, third and even tenth homes… Across the U.S., beginner buyers are looking for to harness the facility of home-price inflation to develop quick and get wealthy by changing into landlords. They’re contributing to hovering values, particularly for starter houses which might be in brief provide. But even that may work in these consumers’ favor – so long as they’re keen to pay up – as a result of Americans getting priced out of homeownership are in flip fueling demand for leases.”

March 23 – Bloomberg (Jordan Yadoo): “Sales of latest U.S. houses fell in February for a second month… Purchases of latest single-family houses decreased 2% to a 772,000 annualized tempo following a downwardly revised 788,000 in January… The median estimate in a Bloomberg survey of economists referred to as for a 810,000 charge… The new-home gross sales report… confirmed the median gross sales worth of a brand new residence jumped 10.7% in February from a 12 months earlier, to $400,600… There have been 407,000 new houses on the market as of the tip of February, essentially the most since August 2008, although roughly 91% have been both beneath development or not but began. At the present gross sales tempo, it might take 6.3 months to exhaust the provision of latest houses…”

March 20 – Financial Times (Nicholas Megaw and Joshua Franklin): “The largest US funding banks have taken a $4.6bn income hit from the freeze in fairness raisings due to latest market volatility, a pointy slowdown for Wall Street which raked in file income from inventory gross sales final 12 months. Morgan Stanley, JPMorgan Chase, Bank of America, Goldman Sachs and Citigroup have generated a cumulative $645mn from fairness capital market (ECM) charges to date this 12 months, in accordance with… Dealogic, in contrast with $5.3bn in the identical interval in 2021. Industry-wide ECM charges are down greater than 75% 12 months on 12 months at $2.7bn. The feast-to-famine swing underscores the unpredictable nature of funding banking…”

March 23 – Reuters (Noor Zainab Hussain and Elizabeth Dilts Marshall): “The common bonus on Wall Street jumped 20% final 12 months to the very best degree since 2006, the New York State comptroller reported… The common payout for securities employees in New York in 2021 was $257,500, a determine boosted by the file ranges of deal-making and buying and selling exercise huge banks dealt with as the worldwide inventory markets surged to all-time highs. ‘The numbers come out … and are greater than what had been projected,’ New York State Comptroller Thomas DiNapoli mentioned…”

March 23 – Reuters (Lindsay Dunsmuir): “An enhance in delinquencies final 12 months amongst a smaller pool of U.S. pupil loans not lined by a forbearance program put in place in the course of the COVID-19 pandemic indicators seemingly issues forward for nearly 37 million loans when that program ends, a New York Federal Reserve evaluation confirmed… Borrowers lined beneath the forbearance program haven’t been required to make funds on their loans since March 2020, however the suspension of repayments is about to run out on the finish of April.”

March 20 – Financial Times (Peggy Hollinger and Richard Waters): “Chipmakers’ multibillion-dollar enlargement plans will likely be constrained by a scarcity of vital tools over the following two years as the provision chain struggles to step up manufacturing, in accordance with one of many trade’s most vital suppliers. The warning comes from Peter Wennink, chief govt of ASML, which dominates the worldwide marketplace for the lithography machines used to make superior semiconductors. ‘Next 12 months and the 12 months after there will likely be shortages,’ Wennink mentioned. ‘We’re going to ship extra machines this 12 months than final 12 months and . . . extra machines subsequent 12 months than this 12 months. But it is not going to be sufficient if we take a look at the demand curve. We actually need to step up our capability considerably greater than 50%. That will take time.'”

Fixed-Income Bubble Watch:

March 21 – Bloomberg (Emily Barrett): “Hopes for a smooth touchdown for the U.S. financial system are fading within the bond market. The Treasury yield curve is hurtling towards an inversion and merchants have added to bets on rate of interest cuts as quickly as subsequent 12 months. They’re rising extra involved {that a} rapid-fire sequence of hikes from the Federal Reserve may trigger a recession, following Chair Jerome Powell’s willingness to behave extra aggressively to get forward of resurgent inflation. ‘The smooth touchdown chance is declining by the day,’ mentioned TD Securities’ head of worldwide charges technique, Priya Misra… ‘It is feasible however actually wants inflation to subside quickly.'”

March 23 – Bloomberg (Amanda Albright): “The $4 trillion state and local-debt market simply logged its most risky 10-day interval for the reason that early 2020 selloff… Benchmark yields rose as a lot as 11 bps on Tuesday, driving the market to its worst day of efficiency since April 2020.”

Economic Dislocation Watch:

March 23 – Bloomberg (Ann Koh and Kevin Varley): “Congestion in the important thing Chinese ports of Shenzhen and Hong Kong because of Covid-19 lockdowns has risen to the very best degree in 5 months, posing doable delays to items heading to the U.S. this summer season.”

March 22 – Bloomberg (Ann Koh and Kyunghee Park): “More than one million containers set to journey 6,000-plus miles of railway linking Western Europe to Eastern China by way of Russia are actually having to search out new routes by sea, including to prices and threatening to worsen the worldwide provide chain chaos. With Moscow’s warfare raging in Ukraine, exporters and logistics companies transporting auto elements, vehicles, laptops and smartphones are actually trying to keep away from land routes passing by way of Russia or the fight zone. Security dangers and fee hurdles stemming from sanctions are mounting, as is wariness that prospects in Europe may boycott merchandise that used Russian rail.”

March 24 – Bloomberg: “China’s Guangdong province, the economic hub with a GDP larger than South Korea, is going through one other spherical of energy shortages after being pressured to curtail electrical energy twice final 12 months. Guangdong faces a good provide state of affairs all year long and a big shortfall within the second quarter, Zhang Mianrong, chairman of the Guangzhou Power Exchange Center, mentioned… Guangdong was hit by energy shortages final summer season when low reservoirs sapped hydropower whereas a warmth wave boosted air-conditioning demand. It needed to curtail electrical energy to some factories once more within the fall when your complete nation confronted a scarcity of coal.”

March 24 – Wall Street Journal (Jon Emont): “In his 9 years promoting fertilizer to corn and rice farmers in West Africa, Malick Niang says he has by no means seen such a extreme provide crunch-or such excessive costs. Since Russia invaded Ukraine, delivery corporations have prevented docking at St. Petersburg, Russia, to gather items, Mr. Niang mentioned. That, along with the affect of the West’s monetary sanctions towards Moscow, means fertilizer exports from Russia-the world’s largest producer-have fallen sharply. Mr. Niang contacted sellers elsewhere, corresponding to in Senegal and Morocco, however was informed their order books are full till the tip of the 12 months. ‘Maybe we are going to discover one or two choices totally different from Russia, however it is going to be very costly,’ he mentioned.”

China Watch:

March 21 – Bloomberg: “China’s authorities mentioned it would step up coverage help for the financial system and capital market, reiterating earlier vows to shore up battered investor confidence within the face of weaker progress, a hunch in property and regulatory crackdowns on expertise companies. In a gathering of the State Council chaired by Premier Li Keqiang, the cupboard referred to as for the adoption of financial coverage instruments to maintain credit score enlargement at a secure tempo… ‘We ought to correctly deal with the issues within the operation of the capital market in accordance with the precept of market and worldwide guidelines, and create a secure, clear and predictable growth surroundings for every kind of market contributors,’…”

March 22 – Bloomberg: “Bribery. Kickbacks. Cover-ups. For one week in January, Chinese state tv devoted its prime-time slot to a sequence that detailed high-profile monetary crimes by a few of nation’s most senior bankers. There was the previous head of China’s largest coverage financial institution, who accepted bribes to approve a $4.8 billion credit score line to a conglomerate that failed shortly after. Another state-owned financial institution govt used fastidiously structured shadow companies to obtain 10 million yuan in kickbacks for approving real-estate loans of greater than 4 billion yuan to a single developer… The latest investigation into 25 entities marks the primary systematic evaluation of the monetary sector since 2015, and final month, when it concluded, the nation’s high disciplinary watchdog sharply criticized monetary establishments and regulators for outstanding corruption and inadequate threat monitoring – issues it mentioned have been ‘frequent.'”

March 25 – Bloomberg: “The largest exchange-traded fund monitoring yuan bonds recorded a whopping $460.4 million of outflows to date this month, including to latest indicators of an exodus from Chinese belongings… Exante Data, which analyzes tendencies in international capital flows, says weekly flows knowledge for March counsel the retreat from Chinese belongings is gathering tempo. ‘The Russian invasion of Ukraine has basically introduced into play a brand new draw back situation for Western holders of Chinese bonds, whereby sanctions and debanking, and the reciprocal use of capital controls, pose a non-negligible but catastrophic threat,’ Grant Wilson, Exante’s head of Asia Pacific, mentioned…”

March 22 – Financial Times (Joe Rennison and Thomas Hale): “A bunch of bondholders is transferring nearer to formal authorized motion towards Evergrande after the world’s most indebted property developer made a shock disclosure that thriller lenders to one in every of its subsidiaries claimed greater than $2bn in money. A bunch of distressed debt buyers within the US and UK together with Saba Capital, Redwood Capital Management and Ashmore met on Tuesday and directed legal professionals to start work on the authorized evaluation wanted to determine whether or not to take motion towards Evergrande… One particular person immediately concerned within the state of affairs mentioned buyers really feel they’ve ‘no alternative’ however to begin authorized motion and that plans have been already ready. ‘I believe it has massively modified the sport,’ the particular person mentioned concerning the $2bn declare. ‘The ambiance within the room is one in every of boiling blood.'”

March 22 – Reuters (Clare Jim, Jason Xue and Shuyan Wang): “Embattled China Evergrande Group will unveil a debt restructuring proposal for its collectors by the tip of July, it mentioned…, after issues about its monetary well being have been renewed by a delay in publishing its annual outcomes. Evergrande, whose $22.7 billion value of offshore debt is deemed to be in default, is looking for to ‘additional improve communications’ with collectors to succeed in the end-July goal, its govt director Siu Shawn informed buyers on a name.”

March 21 – Financial Times (Thomas Hale): “Lenders to a property providers unit of China Evergrande Group have claimed greater than $2bn of its money, dealing a blow to worldwide buyers within the closely indebted actual property developer who have been hoping to recoup a few of their losses by way of the subsidiary. The declare stands to hit the remaining worth of Evergrande’s worldwide bonds, that are already buying and selling at a fraction of their $20bn face worth… A bond maturing in 2025 is buying and selling at 13 cents on the greenback. Evergrande mentioned in a… submitting… that lenders had taken over Rmb13.4bn ($2.1bn) of the subsidiary’s deposits that have been pledged as safety for ‘third get together ensures’. It didn’t give additional particulars or establish the lenders.”

March 20 – Wall Street Journal (Cao Li): “According to authorities statistics, China’s housing market has cooled from its sizzling beneficial properties of years previous however continues to be ticking alongside. The common new-home worth rose 1.7% 12 months over 12 months in January and 1.2% in February. Yet monetary filings, advertising supplies for flats, property brokers and analysts inform a distinct story: Debt-burdened builders are promoting flats at falling costs and in some circumstances offering huge reductions to get money within the door. Since final summer season, most residential real-estate builders in China have reported steep drops in contracted gross sales. Many have additionally disclosed substantial declines in common promoting costs this 12 months, in accordance with a Wall Street Journal evaluation of their month-to-month stock-exchange filings.”

March 23 – Wall Street Journal (Clarence Leong and Cao Li): “China’s property sector is in deep trouble-but it is going to be a while earlier than buyers can see the complete extent of the injury. In the previous week, six builders, together with the key worldwide debtors China Evergrande Group and Kaisa Group Holdings Ltd., mentioned they could not publish audited annual outcomes by Hong Kong’s March 31 deadline, with some blaming pandemic-related issues… Others have lately parted firm with the accountancy companies that beforehand audited their books. The info vacuum may additional injury confidence…”

March 21 – Bloomberg: “Chinese native governments’ income from land gross sales contracted 29.5% in January-February from the identical interval a 12 months in the past, the most important hunch for the interval since at the very least 2015 when comparable knowledge begins… The figures underscore the affect the continued housing hunch is having on authorities funds at a time when native authorities are beneath huge strain to bolster financial progress by spending extra on infrastructure. Goldman Sachs… estimates that combining revenue from land gross sales and property-related taxes, authorities income immediately from the actual property sector shrank by 23.5% in January-February from a 12 months in the past…”

March 21 – Dow Jones (Yoko Kubota): “China’s largest tech corporations are conducting large-scale layoffs this 12 months as they take care of an financial slowdown and Beijing’s regulatory strain. Tencent Holdings Ltd., operator of the favored chat, social media and funds app WeChat, is planning to chop hundreds of workers in a few of its largest enterprise items this 12 months, together with round a fifth of the workers at its cloud unit, folks aware of the matter mentioned.”

March 23 – Bloomberg (Zheping Huang): “Tencent Holdings Ltd. pledged to embrace China’s new paradigm of stricter authorities oversight after reporting its slowest progress on file, declaring the tip of an period that nurtured a number of the world’s largest and most worthwhile companies.”

Central Banker Watch:

March 21 – Bloomberg (William Horobin): “European Central Bank President Christine Lagarde performed down fears about euro-area stagflation, regardless of Russia’s invasion of Ukraine beginning to weigh on the financial system whereas additional stoking already-record beneficial properties in client costs. The warfare can have ‘penalties’ for progress as inflation quickens and confidence is broken, Lagarde informed a convention… The issue for central banks is to keep up worth stability with out hurting exercise, she mentioned. Asked concerning the threat of stagflation, Lagarde mentioned that ‘even within the bleakest situation, with second-round results, with a boycott of fuel and petrol and a worsening of the warfare that goes on for a very long time — even in these eventualities we now have 2.3% progress.'”

March 21 – Bloomberg (Carolynn Look and Alexander Weber): “The European Central Bank should not postpone rising rates of interest from file lows if inflation calls for it, and might be able to begin doing so in 2022, in accordance with Governing Council member Joachim Nagel. If the ECB ends internet bond-buying as deliberate within the third quarter, ‘this opens up the potential of elevating rates of interest this 12 months, if wanted,’ Nagel, who heads Germany’s Bundesbank, mentioned… ‘It’s very clear to me that if the worth outlook requires it, we should proceed to normalize financial coverage and in addition begin elevating our key rates of interest… We mustn’t delay the exit from very free financial coverage.'”

Global Bubble Watch:

March 21 – Bloomberg (Jacqueline Poh): “Firms throughout the globe are ditching fund-raising offers at a quickening tempo, as volatility destabilizes credit score markets following Russia’s invasion of Ukraine. Electric automobile big Tesla Inc. is the most recent huge title agency to scrap financing plans, because it postponed a $1 billion providing of bonds backed by leases on its autos final week. Almost 80 corporations, almost half from the U.S., have put at the very least $25 billion of offers on maintain for the reason that begin of the warfare almost a month in the past.”

Europe Watch:

March 21 – Reuters (Miranda Murray): “German producer costs maintained their record-breaking rise in February, rising 25.9% 12 months on 12 months primarily due to vitality costs… The bounce in manufacturing facility gate prices, thought-about a number one indicator for client costs, was the most important since 1949, the statistics workplace mentioned.”

March 25 – Bloomberg (Carolynn Look): “German enterprise confidence plunged to the bottom degree for the reason that early months of the pandemic after Russia’s invasion of Ukraine clouded the outlook and brought on vitality costs to soar. A business-expectations gauge compiled by the Munich-based Ifo Institute fell to 85.1 in March from 98.4 in February — greater than all however one in every of 27 economists predicted in a Bloomberg survey and the worst studying since May 2020.”

March 24 – Reuters (Bozorgmehr Sharafedin and Rowena Edwards): “European economies face the chance of a scarcity of diesel, the popular gasoline for heavy trade, as sanctions on Russian vitality threaten to disrupt imports whereas provide from elsewhere stays restricted. Russia is Europe’s largest provider of diesel and associated fuels, sending over three quarters of one million barrels per day to be used in European heavy equipment, transportation, farming, fishing and for energy and heating.”

March 23 – Bloomberg (Andrew Langley): “Euro-area client confidence slumped to its lowest degree for the reason that early months of the pandemic as Russia’s invasion of Ukraine pushed up vitality costs and threatened to exacerbate already-record inflation. A month-to-month gauge from the European Commission confirmed a studying of -18.7 in March — down from -8.8 in February and worse than all however one prediction in a Bloomberg survey of 25 economists.”

March 24 – Reuters (Jonathan Cable): “Euro zone enterprise progress was stronger than anticipated this month, a survey confirmed…, though costs rose at a file tempo, seemingly including to strain on the European Central Bank to lift rates of interest. However, a few of that enlargement got here from a rebound following the lifting of COVID restrictions and the outlook is murky as provide chain points attributable to the coronavirus pandemic have worsened following Russia’s invasion of Ukraine.”

Japan Watch:

March 22 – Bloomberg (Shoko Oda and Stephen Stapczynski): “Japan’s worst energy disaster in over a decade is a end result of occasions ranging from the Fukushima catastrophe, and is a matter that the nation will not be capable to rapidly shake. The world’s third-largest financial system has been working on a thinner provide of electrical energy for the reason that triple meltdown at Fukushima in March 2011 shut its huge fleet of nuclear reactors. Market reforms over the following 10 years that aimed to spice up safety of provide and make the grid cleaner led to utilities retiring inefficient and soiled energy vegetation, crimping assets additional. That set the background for the present situation. A robust earthquake final week stretched the facility grid…”

Covid Watch:

March 22 – Reuters (Michael Erman and Bhanvi Satija): “About one-in-three COVID-19 circumstances within the United States are actually attributable to the BA.2 Omicron sub-variant of the coronavirus, in accordance with authorities knowledge… that additionally confirmed general infections nonetheless declining from January’s file highs. Despite the rise of the extraordinarily contagious sub-variant additionally seen in different international locations, U.S. well being consultants say a significant wave of latest infections right here seems unlikely.”

March 25 – Bloomberg: “Shanghai’s new Covid-19 circumstances jumped greater than 60% in a single day, hitting a file 1,609 on Friday, whilst authorities widened restrictions which have restricted entry to meals and medical care with devastating penalties… Scores of buildings and house blocks remained locked down within the Chinese monetary hub amid the rising outbreak, a part of a wave that is difficult China’s zero-tolerance method… Frustrated residents are struggling to safe recent meals as some compounds refuse to allow them to go away, whereas accessing medical care will get more durable…”

March 23 – Reuters (David Stanway and Roxanne Liu): “Authorities within the Chinese metropolis of Shanghai have denied rumours of a city-wide lockdown after a sixth straight enhance in every day asymptomatic coronavirus circumstances pushed its rely to file ranges regardless of a marketing campaign of mass testing aimed toward stifling the unfold… Daily new native COVID-19 infections in Shanghai neared 1,000 on Tuesday, however authorities vowed to stay with a ‘slicing and gridding’ method to display screen neighbourhoods one after the other, moderately than shut down totally.”

March 22 – Reuters (Min Zhang and Twinnie Siu): “China’s high steelmaking metropolis Tangshan applied a short lived lockdown… to keep away from additional circumstances of COVID-19 as infections surged, the native authorities mentioned… Residents shouldn’t go away their homes or buildings apart from checks or emergencies pending additional announcement, the federal government mentioned.”

March 22 – Reuters (David Stanway): “In footage shared on social media final week, a crowd of individuals within the northeastern Chinese metropolis of Shenyang bang towards the home windows of a clothes market as they shout in frustration on the announcement of one more spherical of COVID-19 checks. Though the native authorities rapidly urged folks to not ‘unfold rumours’ concerning the incident, the response from netizens was instant. ‘Refuse quarantine!’ mentioned one. ‘Many folks have awoken to the reality,’ mentioned one other.”

Social, Political, Environmental, Cybersecurity Instability Watch:

March 20 – Bloomberg: “China’s elevated reliance on coal to fight an vitality scarcity was by no means going to bode effectively for its ambitions to chop planet-warming emissions. Now, due to new evaluation of satellite tv for pc knowledge, the consequences of that local weather alternative may already be evident from area. A plume of methane, which traps over 80 occasions extra warmth than carbon dioxide in its first twenty years within the ambiance, was detected by the European Space Agency’s Sentinel-5P satellite tv for pc close to a distant coal mine in Inner Mongolia… The Sentinel-5P had by no means earlier than noticed the highly effective greenhouse fuel in that location, suggesting new or expanded exercise.”

March 18 – Associated Press (Seth Borenstein): “Earth’s poles are present process simultaneous freakish excessive warmth with elements of Antarctica greater than 70 levels hotter than common and areas of the Arctic greater than 50 levels hotter than common. Weather stations in Antarctica shattered information Friday because the area neared autumn. The two-mile excessive Concordia station was at 10 levels, which is about 70 levels hotter than common, whereas the even greater Vostok station hit a shade above 0 levels, beating its all-time file by about 27 levels, in accordance with… Maximiliano Herrera.”

Leveraged Speculation Watch:

March 21 – Yahoo Finance (Alexandra Semenova): “As Western sanctions pummeled Moscow’s monetary system in latest weeks, hedge fund buyers in Russian securities have been hit onerous by the fallout. Russian and European hedge funds plunged 36% within the first two months of 2022, in accordance with… Hedge Fund Research (HFR). Losses got here amid a barrage of financial penalties from the United States and European Union, a collapse within the Russian ruble, and heightened threat of default on Russian bonds.”

Geopolitical Watch:

March 21 – Bloomberg: “Xi Jinping guess that establishing a ‘no limits’ friendship with Vladimir Putin may forestall the U.S. from containing China. Now that settlement threatens to go away Beijing extra remoted and alone. A cellphone name between Xi and U.S. President Joe Biden on Friday appeared to realize no main breakthroughs. The U.S. continued to threaten unspecified penalties if China offers help to Russia, and Beijing insisted it was supporting peace talks whereas blaming the U.S. for triggering the battle. That dynamic to date seems to be pushing extra international locations to the U.S. camp, with the European Union set to bolster the American warning to Beijing at a digital summit deliberate for April 1. China, in the meantime, is struggling to persuade the world it is a impartial participant, as assurances to worldwide audiences are undermined by messages at residence affirming the China-Russia partnership.”

March 24 – Financial Times (Demetri Sevastopulo): “Russia’s invasion of Ukraine has underscored the intense menace that China poses to Taiwan as its navy ratchets up strain on the island, the highest US navy commander within the Indo-Pacific area has warned. Admiral John Aquilino, head of Indo-Pacific Command, mentioned China had displayed a ‘boldness’ over the previous 12 months that ranged from its more and more assertive navy exercise close to Taiwan and different elements of the South China Sea to its speedy nuclear enlargement and a hypersonic weapon take a look at in July. ‘I do not assume anybody 5 months in the past would have predicted an invasion of the Ukraine. So I believe the primary lesson is: ‘Hey, this might actually occur… Number two, do not be complacent . . . We must be ready always.'”

March 19 – Reuters (Ryan Woo): “The U.S. destroyer Ralph Johnson’s sail-through of the Taiwan Strait on March 17 was a ‘provocative’ act by the United States and despatched the flawed indicators to pro-Taiwan independence forces, the Chinese navy mentioned…. Such an act was ‘very harmful’, a Chinese navy spokesperson mentioned in a press release, including that troops have been organised to watch the Ralph Johnson’s passage.”

March 22 – Bloomberg (Andreo Calonzo): “The U.S. and Philippines will maintain their largest navy drills in three a long time as tensions develop with China, injecting new life right into a protection alliance that had languished in recent times. Some 5,100 American troopers and three,800 Philippine navy members will practice within the Southeast Asian nation from March 28 to April 8…”

March 24 – Financial Times (Christian Davies): “North Korea… claimed to have efficiently examined its longest-range intercontinental ballistic missile but, saying its nuclear forces have been ‘absolutely able to completely verify and comprise any harmful navy makes an attempt of the US imperialists’. The claims got here after Pyongyang… raised tensions in East Asia by testing a missile the South Korean navy mentioned reached an altitude of greater than 6,000km – the very best a North Korean missile has ever flown.”

March 24 – Reuters (Hyonhee Shin): “South Korea’s President Moon Jae-in mentioned on Thursday North Korean chief Kim Jong Un had damaged a moratorium on launching intercontinental ballistic missiles, strongly condemning the most recent missile take a look at…”

March 20 – Bloomberg (Omar Tamo and Mohammed Hatem): “Yemen’s Houthi rebels attacked at the very least six websites throughout Saudi Arabia late Saturday and early on Sunday, together with some run by state oil big Saudi Aramco. The Iran-backed group focused an Aramco gasoline depot in Jazan within the southwest of the dominion and a liquefied pure fuel plant within the Red Sea metropolis of Yanbu…”

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Editor’s Note: The abstract bullets for this text have been chosen by Seeking Alpha editors.

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