Financial data and news summary for last week

Source:
http://creditbubblebulletin.blogspot.com/2022/04/weekly-commentary-historic-q1-2022.html

Credit Bubble Bulletin
Weekly Commentary:
Historic Q1 2022
by Doug Noland

Following is my edited easy to read version
Ye Editor

For the Week Ending March 31, 2022:

GLOBAL  STOCK  INDEXES:

 
S&P500 (down 4.6% y-t-d) and
Dow Industrial (down 4.2%) 

were both little changed.

Utilities surged 3.7% (up 4.5%)

Banks slumped 6.7% (down 7.3%)

Transports sank 5.3% (down 5.9%)

S&P 400 Midcaps unchanged (down 4.6%)

Small cap Russell 2000 rose 0.6% (down 6.9%)

Nasdaq100 increased 0.7% (down 8.9%)

Semiconductors fell 4.5% (down 14.7%)

Biotechs rallied 4.1% (down 5.1%)

While gold bullion was down $32,
the HUI gold stock index gained 2.1%
   (up 24.1%)

U.K.'s FTSE added 0.7% (up 2.1% y-t-d)

Japan's Nikkei declined 1.7% (down 3.9% y-t-d)

France's CAC40 rallied 2.0% (down 6.6%)

German DAX recovered 1.0% (down 9.1%)

Spain's IBEX 35 rose 2.1% (down 2.4%)

Italy's FTSE MIB jumped 2.5% (down 8.0%)

Brazil's Bovespa gained 2.1% (up 16.0%)

Mexico's Bolsa gained 2.1% (up 6.3%)

South Korea's Kospi increased 0.4% (down 8.0%).

India's Sensex jumped 3.3% (up 1.8%).

China's Shanghai rallied 2.2% (down 9.8%).  

Turkey's Istanbul National 100 jumped 3.5%
   (up 21.2%)

Russia's MICEX surged 11.1% (down 27.1%).


US  BONDS:
Three-month Treasury bill rates
 ended the week at 0.5025%.

Two-year government yields
surged 19 bps to 2.46% (up 173bps y-t-d).

Five-year T-note yields
added one basis point to 2.56% (up 130bps).

Ten-year Treasury yields
dropped nine bps to 2.39% (up 87bps).

Long bond yields
fell 15 bps to 2.43% (up 53bps).

Benchmark Fannie Mae MBS yields
dropped 12 bps to 3.58% (up 152bps).

Federal Reserve Credit last week
declined $21.3bn to $8.903 TN.
Over the past 133 weeks,
Fed Credit expanded $5.176 TN, or 139%.


US  MORTGAGES:
Freddie Mac 30-year fixed mortgage rates
surged 25 bps to 4.67%,
the high since December 2018
   (up 149bps y-o-y).

Fifteen-year rates rose 20 bps to 3.86%
   (up 138bps).

Five-year hybrid ARM rates
gained 14 bps to 3.50%
   (up 66bps)

Jumbo mortgage 30-year fixed rates
up 39 bps to a decade-high 4.91%
   (up 162bps).

 

COMMODITIES:
Bloomberg Commodities Index dropped 4.6%
   (up 24.9% y-t-d).

Spot Gold declined 1.7% to $1,926 (up 5.3%).

Silver fell 3.5% to $24.63 (up 5.7%).

WTI crude oil sank $14.63 to $99.27 (up 32%).

Gasoline slumped 9.1% (up 42%),

Natural Gas rose 2.7% (up 53%).

Copper slipped 0.2% (up 5.0%).

Wheat sank 10.7% (up 27.7%)

Corn fell 2.5% (up 24%).

Bitcoin rose $1,900, or 4.3%,
this week to $46,297
   (down 0.2%).

March 31
– Wall Street Journal:
“Commodities wrapped up their best quarter in more than 30 years after Russia’s invasion of Ukraine supercharged a rally in markets from oil to wheat and nickel… The S&P GSCI, a benchmark tracking the prices of commodities futures from precious metals to livestock, has climbed 29% in the first quarter, notching its biggest gain since 1990.”

WTI Crude traded to $126 (March 7th),
before ending the quarter up 33% at $100.28.

Gasoline jumped 41% during Q1

Natural Gas surged 51%.

Nickel spiked spectacularly
and held some of those gains
to end Q1 up 55%.

Aluminum rose 24%,
Iron Ore 39%,
Zinc 18%.

Wheat was up 77% y-t-d early in the War,
before ending the quarter up 34%.

Corn jumped 26%, and
Soybeans rose 20%.
Cotton jumped 23%.
Gold gained 6.9%
Silver rose 6.4%.


DOUG  NOLAND'S  COMMENTARY:
(highly edited)

“Inflation Hits a New 40-year High.”
“Bond Market Suffers Worst Quarter in Decades.”
“Commodities Finish Best Quarter in 32 Years.”

“China Home Sales Slump Worsens Despite Vows to Support Market.” “China Growth Outlook Worsens as Manufacturing,

"Home Sales Slump.”
“Recession Warning Sign Flashes as Yield Curve Inverts.”

Until proven otherwise, the Chinese clubby homecoming this week for its “partner with no limits” (Russia) supports the thesis that China is fully on board with a reformulation of the “world order”.

Why are long-term real (adjusted for inflation) yields remaining so deeply negative – 10-year yields at only 2.39% - with almost 8% y-o-y consumer price inflation and the Fed commencing what is expected to be the most hawkish tightening cycle since 1994?

And with the 2-yr/10-yr Treasury yield spread trading negative this week, some interpret this as a signal of looming recession.

The Shanghai Composite sank 10.6% during Q1, with the growth-oriented ChiNext Index sinking 19.9%.

An index of dollar-denominated high-yield Chinese corporate bonds saw its yield surge to 22.5% (traded as high as 27.9% on 3/16) from 16.8% to begin the year.

From early-January highs to February 24th lows,
the S&P500 dropped 14.6%.

The S&P500 had then rallied 12.7%
at March 29th trading highs.

Over this period, the Nasdaq100
dropped 20.9%, only then to rally 16.8%.

After beginning March at 1.73%,
10-year Treasury yields surged 75 bps
to peak at 2.48% on March 25th.

March 31
 – Wall Street Journal:
“U.S. bonds’ worst quarter in more than 40 years has come to a close… The Bloomberg U.S. Aggregate bond index—largely U.S. Treasurys, highly rated corporate bonds and mortgage-backed securities—returned minus 6% in 2022 through Wednesday, on track for the biggest quarterly loss since 1980."

The iShares Treasury Bond ETF (TLT)
returned negative 10.63% for the quarter.

NEWS  FROM  LAST  WEEK:
 
Russia/Ukraine Watch:

March 27
– Reuters:
“Ukraine is willing to become neutral and compromise over the status of the eastern Donbass region as part of a peace deal, President Volodymyr Zelenskiy said…, even as another top Ukrainian official accused Russia of aiming to carve the country in two… Kyrylo Budanov, said Russian President Vladimir Putin was aiming to seize the eastern part of Ukraine. ‘In fact, it is an attempt to create North and South Korea in Ukraine,’ he said, referring to the division of Korea after World War Two.”

Economic War /  Russia Watch:

March 30
– Reuters:
“The Kremlin indicated… that all of Russia's energy and commodity exports could be priced in roubles, toughening President Vladimir Putin's attempt to make the West feel the pain of the sanctions it imposed for the invasion of Ukraine. With Russia's economy facing its gravest crisis since the 1991 collapse of the Soviet Union, Putin on March 23 hit back at the West, ordering that Russian gas exports should be paid for in roubles. That move forced Germany, Europe's biggest economy, to declare on Wednesday an ‘early warning’ that it could be heading for a supply emergency. Germany imported 55% of its gas from Russia last year.”

March 28
– CNBC:
“There’s been a ‘significant uptick’ in Russian oil deliveries bound for India since March after Russia’s invasion of Ukraine began — and New Delhi looks set to buy even more cheap oil from Moscow, industry observers say. China, already the largest single buyer of Russian oil, is also widely expected to buy more oil from Russia at deep discounts, they say.”

March 30
– Bloomberg:
“AerCap Holdings NV, the world’s largest aircraft-leasing firm, is seeking about $3.5 billion from insurers related to jets and engines stuck in Russia following the invasion of Ukraine.”

U.S. / Russia Watch:

March 29
– Reuters:
“Russia accused the United States… of leading a massive campaign of ‘cyber aggression’ behind hundreds of thousands of malicious attacks a day while Russia has troops in Ukraine. The foreign ministry said media, critical infrastructure and life support systems had been targeted, with the unprecedented scale pointing at U.S. and NATO-trained special forces as well as hackers acting on behalf of Kyiv's western sponsors.”

China / Russia /  U.S. Watch:

March 30
– Newsweek:
“Chinese Foreign Minister Wang Yi praised Russia for its efforts to ‘prevent a large-scale humanitarian crisis’ in Ukraine, saying that the relationship between China and Russia ‘maintained the right direction of progress’ amid the war in Eastern Europe.”

Europe / Russia / China Watch:

March 28
– Bloomberg:
“Energy ministers from the Group of Seven industrialized nations unanimously rejected Russian President Vladimir Putin’s demand that natural-gas contracts be paid in rubles. The order represents a ‘one-sided and clear breach of contracts,’ German Economy Minister Robert Habeck said… after chairing G-7 talks. ‘That means that a payment in rubles is not acceptable and we urge the relevant companies not to comply with Putin’s demand.’”

March 30
– Bloomberg:
“The economic damage from the war in Ukraine is worsening across Europe as already-record inflation soars further and Germany faces a danger of recession because of its dependence on Russian energy. President Vladimir Putin’s invasion has sapped euro-area confidence and sent consumer-price expectations to their highest level since records began in 1985. In Spain, inflation surged by almost 10% in March -- the most in nearly four decades -- while it also topped expectations in Germany.”

Market Instability Watch:

March 30
– Bloomberg:
“It’s been three weeks since nickel was suspended on the London Metal Exchange after a 250% price spike and while trading has resumed, the market remains all but paralyzed. As the crisis plays out, accusations are already beginning to fly. Investors are preparing lawsuits; the LME and its regulator, the Financial Conduct Authority, are likely to run investigations. It’s far from clear that any party broke any rules — it may be that the rules just weren’t fit for purpose.”

March 29
– Bloomberg:
"There’s a bond crisis brewing in Belarus, which has the world’s worst-performing government debt this year. Notes from the key Russian ally… have slumped to levels that suggest investors see little hope of getting repaid. Belarus dollar-denominated debt due in 2027 was quoted as low as 6.5 cents on the dollar on March 7, down from 88 cents just days before Russia’s invasion…”

Inflation Watch:

March 31
– Associated Press:
“An inflation gauge that is closely monitored by the Federal Reserve jumped 6.4% in February compared with a year ago, with sharply higher prices for food, gasoline and other necessities squeezing Americans’ finances. The figure… was the largest year-over-year rise since January 1982. Excluding volatile prices for food and energy, so-called core inflation increased 5.4% in February from 12 months earlier.”

March 30
– Wall Street Journal:
“The U.S. is shipping more natural gas than ever overseas, which is keeping domestic inventories lean and power prices high. Natural-gas prices usually decline into spring, when heating demand drops but before air-conditioning season begins. Gas producers and traders use the off-season to build up inventory for summer, socking away fuel in storage facilities until the weather turns and demand and prices rise. This year prices climbed into spring, thanks to record export volumes and promises from the White House to support the shipment of even more liquefied natural gas, or LNG, to allies across the Atlantic to supplant Russian supply.”

March 29
– Bloomberg:
“Avocado prices jumped to the highest in more than two decades amid tightening supplies in Mexico, the world’s biggest exporter of the fruit, signaling pricier guacamole.”

Biden Administration Watch:

March 29
– Reuters:
“The United States and its allies plan new sanctions on more sectors of Russia's economy that are critical to sustaining its invasion of Ukraine, including military supply chains, Deputy U.S. Treasury Secretary Wally Adeyemo said… Adeyemo… said the broadening of those efforts was aimed at undermining ‘the Kremlin's ability to operate its war machine.’”

March 28
– Reuters:
“U.S. corporate stock buybacks are being targeted in U.S. President Joe Biden's 2023 budget plan announced on Monday, which seeks to discourage corporations from using profits to repurchase stocks in order to benefit executives. Under the plan, company executives would be required to hold on to company shares that they receive for several years after taking them, and they would be prohibited from selling shares in the years after a stock buyback.”

U.S. Bubble Watch:

March 29
– Bloomberg:
“U.S. job openings in February were little changed near a record high and quits edged up, highlighting the ongoing mismatch between labor supply and demand that’s pushing up wages. The number of available positions totaled 11.3 million in the month, the Labor Department’s Job Openings and Labor Turnover Survey, or JOLTS, showed…”

March 30 

– CNBC:
“Companies added jobs at a solid pace in March, indicating that hiring is strong despite signs of a tightening labor market, payroll processing firm ADP reported… Private payrolls expanded by 455,000 for the month, the firm said, about in line with the Dow Jones estimate of 450,000 though it was the lowest since August 2021.”

March 31
– Bloomberg:
“Mortgage rates in the U.S. continued their steep ascent, reaching a level not seen since December 2018. The average for a 30-year loan was 4.67%, up from 4.42% last week… Rates are up more than a percentage point and a half since the start of the year, the largest three-month increase since 1987.”

March 29
– Wall Street Journal:
“Home-price growth accelerated in January as the supply of homes for sale fell to a new low. The S&P CoreLogic Case-Shiller National Home Price Index… rose 19.2% in the year that ended in January, compared with an 18.9% annual gain the prior month. Home prices rose at a record pace in 2021 and have continued to climb this year as home-buying demand strongly outpaces the supply of homes for sale. Competition among buyers is leading to bidding wars, and many homes are selling above their list price.”

China Watch:

March 30
– Bloomberg:
“Borrowing by Chinese businesses plunged in the first quarter and interest rates on loans surged to a record despite the central bank’s efforts to encourage more lending, according to China Beige Book International. Only 16% of the companies surveyed by CBBI… applied for loans in the first three months of 2022, the lowest since the quarterly poll began in 2012… The firms also paid for the most costly loans since 2012 even though the People’s Bank of China cut its policy rates early in the year. The average interest rate for bank loans climbed to 8.5% from 6.1% in the fourth quarter of 2021, while those for shadow financing loans surged to 15.1% from 10.7%, according to… CBBI. The survey paints a grimmer picture of credit demand in the corporate sector than the slowdown reflected in the official data.”

March 31
– Bloomberg:
“China’s home sales slump deepened in March, keeping pressure on cash-strapped developers even as policy makers vow to support the property market. The 100 biggest companies in China’s debt-ridden property industry saw a 53% drop in sales from a year earlier, according to… China Real Estate Information Corp. That’s the steepest decline this year.”

March 29
– Dow Jones:
“Auditors have resigned from a series of Chinese property companies, reflecting the challenges of verifying these businesses' financial health after a punishing sector-wide downturn. Audit firms are probably taking a hard look at the developers' results after a series of revelations about off-balance-sheet debts… Pandemic-related restrictions in mainland China and Hong Kong have also made it harder to collect information. In recent days, PricewaterhouseCoopers has quit as auditor at three developers, Ronshine China Holdings Ltd., Powerlong Real Estate Holdings Ltd. and Shimao Group Holdings Ltd., and at two linked property-management companies…”

March 31
– Bloomberg:
“Hong Kong’s retail sales contracted 14.6% in February from a year ago, the biggest decline since July 2020 as the government imposed tough restrictions to battle the city’s worst-ever Covid outbreak.”

Europe Watch:

March 30
– Financial Times:
“German inflation rose to its highest rate for 40 years as European Central Bank president Christine Lagarde warned that Russia’s war in Ukraine was delivering a ‘supply shock’ to the eurozone economy. A 39.5% jump in energy prices from a year earlier was the main driver behind Germany’s higher than expected increase in harmonised consumer prices to 7.6%... Berlin is preparing for a potential halt in gas deliveries from Russia because of a dispute over payments. Presenting her gloomiest assessment yet of how the invasion would hit the bloc’s economy, Lagarde said Europe was ‘entering a difficult phase’ as she outlined how the soaring price of energy, food and manufactured goods would squeeze consumers’ purchasing power.”

April 1
– Bloomberg:
“Euro-zone inflation accelerated to another all-time high as Russia’s invasion of Ukraine roiled global supply chains and provided a fresh driver for already-soaring energy costs. March consumer prices surged 7.5% from a year ago, up from 5.9% in February and more than the 6.7% median estimate... Showing the increasingly broad nature of the advance, a core gauge excluding volatile components also hit a new record.”

March 31
– Bloomberg:
“French inflation accelerated more than expected to reach another record, reflecting the economic repercussions of Russia’s invasion of Ukraine and the growing challenges facing policy makers. European Union-harmonized consumer prices rose 5.1% from a year ago in March -- the most since the data series began in 1997.”

March 30
– Associated Press:
“Inflation in Spain hit a 37-year high in March, rising to 9.8% over the past year as consumer prices have soared worldwide. The provisional figure, the highest since May 1985, is an increase over the 7.6% annual inflation rate reported for February…”

March 31
– Bloomberg:
“The end of quarter is putting a spotlight on just how historic the global bond selloff has been. For Germany’s 10-year debt, yields have risen 75 bps to 0.58% in the first quarter, which would be the biggest increase since 1994…”

EM Bubble Watch:

March 31
– Bloomberg:
“While a potential cease-fire deal in Ukraine sparked a relief rally this week, warning signs are still flashing in the $17 billion pool of eurobonds from Tajikistan, Georgia, Belarus, Armenia, Uzbekistan, and Kazakhstan… ‘Extensive economic links’ could ‘affect the ability of former Soviet republics to repay their external debt,’ said Claudia Calich, head of emerging market debt at M&G Investments... ‘They’re ‘risky as they’re still very dependent on the conflict.’”

Japan Watch:

March 29
– Bloomberg:
“Japan’s retail sales fell for a third straight month in February amid the country’s biggest wave of virus infections adding to concern that the economy’s recovery may have slipped back into reverse. Sales fell 0.8% in February from the month before…”