April 14, 2023
- Global finance chiefs, gathering in Washington little more than a year after the shock Russian invasion of Ukraine, are drawing sharply different conclusions about the biggest risks to the outlook, in a split showcasing the rising role of geopolitical struggles in the world economy. The key takeaway among rich, democratic nations: the need for more “resilience” in supply chains, to ensure their economies are better insulated from risks ranging from war and pandemics to attempts at coercion by authoritarian regimes. But others, including the International Monetary Fund, are warning against a “fragmentation” of the global economy into competing blocs that hurts growth. “All countries are going to want to have more resilient supply chains in a much less stable world — the lesson of Ukraine was that energy dependence on Russia was probably a mistake,” UK Chancellor of the Exchequer Jeremy Hunt told reporters Thursday. “We want to make sure that it’s not just energy dependence, but technology dependence, critical-minerals dependence, all sorts of other dependences” that are addressed, he said.
- Loblaw Cos. said it plans to invest more than C$2b into the Canadian economy in 2023. Highlights of Loblaw’s capital investments in 2023 include new discount-format supermarkets, an increase in pharmacist-led health clinics, hundreds of carbon reduction initiatives and continued development of a modern distribution center in the Greater Toronto Area, company said in a statement. Its capital investments in 2023 are expected to create thousands of jobs and see it grow and improve its store network, opening 38 new and/or relocated stores and converting or renovating nearly 600 others
- European stocks edged higher on Friday, set for their longest weekly gaining streak since early December, as investors bet central banks could soon reach a peak in their rate-hiking cycle amid slowing economic growth and as luxury shares extended their rally. The Stoxx 600 added 0.4% by 11:04 a.m. in London. The benchmark index is now set for a fourth straight week of gains, its longest since Dec. 2. The Euro Stoxx 50 Index of blue-chips was less than 1% away from a 2007 high. After being roiled last month by turmoil in the banking sector, European stocks have resumed their advance as cooling inflation bolstered optimism that policy makers could stop rate hikes sooner than expected. European Central Bank Governing Council member Robert Holzmann said on Thursday that a 50-basis-point hike “could be in the ballpark next time, what happens afterward depends as always on the conditions.”
- US equity futures were mixed on Friday, as bank earnings season began and traders weighed bets the Federal Reserve could be nearing the end of its rate-hiking cycle. Contracts on the Nasdaq 100 extended a loss to 0.5% after the underlying benchmark rose about 2% the previous day. Those on the S&P 500 were steady after the underlying gauge had climbed the most this month Thursday, following softer US factory-gate inflation and a rise in the number of Americans claiming jobless benefits. MSCI Inc.’s World Index rose for a second day, having touched the highest in more than 10 weeks. As bond traders added to wagers the Federal Reserve will cut interest rates by end-2023, Treasury yields inched higher, with the rate-sensitive two-year segment holding below 4%. Meanwhile, a Bloomberg gauge of the dollar steadied after dropping to the lowest since February.
- Asian stocks reached the highest level in almost two months, as a slew of weaker-than-expected US economic data fueled bets that the Federal Reserve may soon pause its interest rate hikes. The MSCI Asia Pacific Index rose as much as 0.6% Friday, lifted by technology and industrial shares. Most markets in the region advanced, with Japanese stocks leading gains after Fast Retailing climbed the most in two years on higher profit guidance. India and Thailand were closed for holidays. Singapore’s central bank surprised the market by keeping its monetary policy settings unchanged, joining other central banks in Canada and Australia in pausing monetary tightening given rising global recession risks and ebbing inflation.
- Oil headed for a fourth straight week of gains, supported by signs of a tightening global market as the International Energy Agency warned of higher prices. West Texas Intermediate traded near $82 a barrel, taking its weekly advance to about 2% and the longest winning run since June. The rally had been driven by improving fundamentals after OPEC+ cut supplies, with brisk buying seen in both Europe and Asia. Key market timespreads signal firmer conditions. The Organization of Petroleum Exporting Countries said Thursday the market was set for a hefty supply deficit that’ll widen as the year progresses. The latest output cuts by the group threaten to boost oil prices for consumers already facing high inflation, the IEA said in its monthly outlook on Friday.
- Gold edged lower, trimming a weekly gain that has pushed the metal near a record high on bets that the Federal Reserve is approaching the end of its rate-hike cycle. Bullion is up 1.4% this week, after rallying on Thursday as weaker-than-expected US producer-price data bolstered the view that the Fed’s aggressive monetary tightening is almost over. A gauge of the dollar is near the lowest since early February, further supporting the non-interest bearing metal. Spot gold lost 0.3% to $2,035.13 an ounce by 10:15 a.m. in London, but is heading for a second weekly advance. Silver and platinum were little changed, while palladium declined.
- The Biden administration is going to have a hard time explaining how the biggest US intelligence leak in a decade may have been committed by a 21-year-old airman whose role — “cyber transport systems journeyman” — required a high-school degree, a driver’s license and up to 18 months of on-the-job-training. The FBI arrested Jack Teixeira, of Dighton, Massachusetts, on Thursday, with the promise of a swift arraignment on Friday. Attorney General Merrick Garland said he was being held in connection with the “unauthorized removal, retention and transmission of classified national defense information.” As Pentagon jobs go, Teixeira’s was pretty junior. An Air Force job description says workers like him “keep our communications systems up and running and play an integral role in our continuing success.” He joined the Air National Guard in 2019, according to his service record.
- Boeing Co. is pausing deliveries of some 737 Max jets to address a production issue on the rear end of some aircraft, dealing a setback to the US manufacturer just as it ramps up production of the model that’s a major cash cow for the company. The shares fell as much 5% in premarket trading after Boeing said late yesterday that it expects deliveries to decline in the near-term as it inspects affected aircraft. Spirit AeroSystems Holdings Inc., which supplies the faulty part, fell more than 11%. Boeing was just regaining its footing following years of turmoil caused by the pandemic and a global grounding of the single-aisle Max. The planemaker had been briefing customers on plans to increase production rates of the Max, Bloomberg reported last week. Days later, Boeing reported a surge in quarterly deliveries that outpaced rival Airbus SE for the first time in almost five years.
- The US is pressing the need for allies to coordinate against economic coercion, not just military threats, as Japan prepares to host top diplomats from the Group of Seven nations amid heightened tensions with China. “That coercion piece is important,” US Ambassador to Tokyo Rahm Emanuel said in an interview days before the ministerial meeting begins in the mountain resort of Karuizawa on Sunday. “It keeps the United States in the center of gravity and helps our allies and alliance and our friends to know that we are in the game.” China is set to be a key focus of discussions at the meeting, which will lay the groundwork for a leaders’ summit in Hiroshima next month. Japanese Prime Minister Fumio Kishida has invited a raft of guest leaders from Asia and beyond, including from South Africa and South Korea.
- BlackRock Inc.’s assets swelled to $9.09 trillion in the first quarter as stock and bond markets rallied and depositors sought cover following the collapse of several US banks. Net flows into all of the firm’s funds totaled $110 billion, New York-based BlackRock said Friday in a statement. Long-term investment products, which include mutual funds and ETFs, added $103 billion, beating the $84.1 billion average estimate of analysts in a Bloomberg survey. The Federal Reserve began hiking rates aggressively early last year in an effort to tame inflation, testing the resilience of many small and mid-size lenders. Deposits at commercial banks have tumbled — especially in the weeks that followed the mid-March collapse of Silicon Valley Bank and Signature Bank. BlackRock, meanwhile, has weathered the upheaval, as clients poured a net $8 billion into its cash-management products in the first quarter.
- The key iron ore export hub of Port Hedland reopened after the biggest cyclone to hit Western Australia in at least a decade made landfall, with a major gold mine lashed by destructive winds as the storm moved inland. Port Hedland reopened at 11 a.m. local time Friday after an inspection of the channel and berths confirmed safe operations can resume, according to Pilbara Ports Authority. BHP Group and Fortescue Metals Group Ltd. export iron ore from the harbor, which was closed on Thursday. Severe tropical cyclone Ilsa crossed the coast overnight east of Port Hedland in a sparsely populated region as a category 5 — the strongest on the Australian scale. The storm is weakening as it tracks inland but had maintained cyclone intensity as it reached Newcrest Mining Ltd.’s Telfer gold and copper operation, which is 400 kilometers (248 miles) from the port.
- Mitsubishi UFJ Financial Group Inc.’s wealthy clients lost more than $700 million on Credit Suisse Group AG’s riskiest bonds purchased through the Japanese bank’s brokerage venture with Morgan Stanley, according to people familiar with the matter. Japan’s largest banking group is holding meetings of senior officials to look into the matter as it reaches out to roughly 1,500 clients who lost a combined 95 billion yen ($717 million), said the people, who asked not to be named discussing private information. While MUFG is hardly the only firm to get caught up in the Credit Suisse debacle, the loss tally offers one of the first glimpses into how badly clients of a major investment bank were burned by the writedown. The Credit Suisse bonds, known as Additional Tier 1 notes, were purchased by customers from Mitsubishi UFJ Morgan Stanley Securities Co.
- JPMorgan Chase & Co.’s first-quarter deposits unexpectedly rose from the end of last year and the firm boosted its guidance for this year’s net interest income. Shares of the company surged in early trading in New York. The lender had $2.38 trillion in deposits at the end of March, compared with $2.34 trillion three months earlier, the company said in a filing Friday. The influx of client money more than offset drains from inflation and customers seeking higher-yielding alternatives. Net interest income was $20.7 billion in the quarter, a 49% jump and above analysts’ expectations. JPMorgan raised its full-year NII guidance to about $81 billion from its roughly $73 billion estimate earlier this year, noting there are “significant sources of uncertainty.”
- Wells Fargo & Co. reported higher-than-expected net interest income in the first quarter as the firm continued to reap the gains of the Federal Reserve’s rate hikes. The firm had $13.3 billion in NII in the first three months of year, up 45% from a year earlier and more than the 42% jump analysts expected, Wells Fargo said in a statement. That helped counter a surge in provisions for souring loans, leaving profit to top analysts’ estimates. Wells Fargo and peers JPMorgan Chase & Co. and Citigroup Inc. are kicking off big bank earnings Friday, offering a first look at how lenders fared through a tumultuous quarter in which three smaller banks collapsed. PNC Financial Services Group Inc. also reported Friday, the first results for regional firms.
- China said it released relevant notices on the risk of falling debris near Taiwan this weekend following a planned satellite launch, denying Taipei’s claims that a no-fly zone will be imposed to the north of the island. “It is not accurate that we’ve set a no-fly zone,” Foreign Ministry spokesman Wang Wenbin said at a regular briefing in Beijing on Friday, describing the issuance of notices on space activities as a “responsible act to ensure aviation safety.” Taiwanese authorities said earlier that China planned a no-fly zone encompassing many international airline routes from 9:30 a.m. to 9:57 a.m. local time Sunday for “aerospace activities.” China aims to launch a meteorological satellite from Gansu province in the north of the country at 9:40 a.m., Taiwan’s CNA reported late Thursday.
- Hermes International’s quarterly sales jumped as Chinese shoppers snapped up its pricey scarves and Kelly handbags, fueling optimism the global luxury industry’s top performers will carry on growing despite economic headwinds. Revenue climbed 23% in the first three months of the year at constant exchange rates, Paris-based Hermes said Friday, exceeding analysts’ estimates. The shares rose as much as 2% in early trading, and have gained more than a third in 2023. “After a very good fourth quarter, we had robust traffic, even slightly higher in early 2023” in China, Chief Financial Officer Eric du Halgouet told reporters Friday. Sales during the Chinese New Year were “very good,” the company said.
- Last month, EU lawmakers were dragged into meetings with some of the world’s biggest financial firms eager to voice their anxiety over a planned piece of ESG regulation that has the potential to expose them to unprecedented legal risk. The regulation in question is the Corporate Sustainability Due Diligence Directive (CSDDD), which the European Union hopes will force all industries to pay more attention to the value chains connected to their operations. If a single link is tied to human rights abuses, environmental destruction or similar acts, the goal is to hold the EU-based firm accountable. The finance industry says such a wide-reaching rule is reasonable to consider for manufacturers, but not for banks, asset managers and insurers.
- President Joe Biden’s return to Ireland unleashed a wellspring of reflection and parable, even for a man prone to both. And while he stopped short of an announcement, the lessons of Ireland hang over his next decision: a bid for reelection next year at age 81. His trip saw perfunctory formal events overshadowed by a more personal schedule — visits to touchstones of the Biden family history, steeped in themes of Irish rise, struggle and ritual. Yet the pomp and circumstance also ceded international attention to the most damaging and embarrassing US intelligence leak in a decade, one that the president sought to downplay and that culminated in an arrest Thursday. Still, it was a homecoming in which a clearly overjoyed Biden saw more adoring crowds than he typically gets in America, where his popularity is middling and rooted more to his stewardship and the contrast he makes with his predecessor than adoration.