Weekly IP #13

Jan 6

Starting this week, we will reduce commentary in the periodical. We'll be serving up a heaping helping of the news and insights you need to stay informed. Think of it as a buffet of brain food, with an occasional clever quip to keep things interesting. Bon appétit!

Economy Insights

“No FOMC participants anticipated that it would be appropriate to begin reducing the federal funds rate target in 2023.”
Federal Reserve officials say that interest rates will not be cut in 2023. But hey, we've got a whole year ahead of us - stranger things have happened!
Salesforce has announced that it will lay off around 8,000 employees due to declining software purchases by its clients in the tech and finance sectors, which have been impacted by economic uncertainty and the possibility of a US recession. Amazon has announced that it will lay off more than 18,000 employees, a higher number than the original estimate of 10,000.

Commodity Digest

Saudi Arabia’s revenue from exports of crude oil and refined products such as diesel fell to $25.5 billion in October — the lowest figure since February, reflecting how a weakening global economy and high inflation have hit the oil market.
A warmer-than-expected start to winter across large parts of the world is rapidly easing fears of a natural gas crisis that had been predicted to trigger outages and add to pressure on power bills. Natural gas prices in Europe have fallen to their lowest level since before Russia’s invasion of Ukraine due to mild weather reducing demand and easing concerns about a supply crunch.
Oil prices have declined due to weak demand forecasts, the possibility of a US recession, the resurgence of COVID-19 in China, and mild winter weather. West Texas Intermediate fell below $75 per barrel.

International Updates

U.S. oil company Chevron has a tanker on the way to the sanctioned country, Venezuela. The crude cargo will be the first Venezuelan crude oil shipment to arrive in the United States in almost four years.
British rail workers will walk off the job much of this week (five days starting Wednesday), snarling the usual return to work following the holidays and interrupting January sales that are crucial for retailers. The protests stem from growing anger over the tightest cost-of-living squeeze in memory.
Australia’s housing market suffered its biggest annual decline since 2008 last year as sharp interest rate hikes sapped buying power and put off investors. The biggest decline was seen in Sydney, where prices fell 12.1%, followed by an 8.1% drop in Melbourne. CoreLogic said values could fall further in the early months of 2023.
Manufacturing indexes showed contraction across trade-heavy Asia, and an early indicator of regional growth, Singapore’s GDP, was a warning for lingering factory pain into the new year.
Finally, on 8 January, the Chinese government will remove all quarantine requirements for inbound travelers. The only requirement is that travelers need a PCR test 48 hours before departure. And at the same time, Hong Kong will also introduce quarantine-free travel for mainland Chinese visitors on 8 January, and post-arrival tests will no longer be needed.
China is pausing massive investments aimed at building a chip industry to compete with the US, as a nationwide Covid resurgence strains the world’s No. 2 economy and Beijing’s finances.
Chinese authorities plan to implement additional measures to support some of the country's too-big-to-fail real estate developers. The aid could range from providing equity financing and loans to allowing the creation of real estate investment trusts and spurring acquisitions, according to people familiar. These measures come as the Chinese real estate market faces a record slowdown and liquidity crunch.
Chinese officials are considering lifting a ban on importing Australian coal that has been in place for over two years as relations between the two countries improve.
Spain's passenger car sales declined by 14% in December due to transportation bottlenecks that limited the movement of vehicles to sales points. This decrease follows four consecutive months of growth and highlights the impact that supply issues can have on the recovery of European auto sales.
Pakistan's government is implementing measures to reduce energy consumption, including requiring restaurants, hotels, and shops to close early in the evening, in an effort to address a severe energy crisis.

Stock Watch

The tech-heavy Nasdaq 100 lost about a third of its value in 2022 as technology stocks emerged as some of the most vulnerable to rising rates.
US stocks declined at the beginning of the new year due to negative market sentiment. Companies such as Tesla and Apple saw their stocks fall as a result of concerns about slowing demand and its potential impact on the US economy and growth stocks.

Business Brief

Huawei posted its third straight quarter of growth, declaring a return to normalcy after overcoming a plethora of US restrictions last year.
Taiwan Semiconductor Manufacturing Company (TSMC) has begun mass production of next-generation chips.
Sam Bankman-Fried has pleaded not guilty to criminal charges relating to the collapse of FTX and is set to face trial in October.
Three users of the Gemini "Earn" product have filed a request for a class-action lawsuit against Genesis Global Capital and Digital Currency Group (DCG). Gemini paused redemptions on its "Earn" product in November, a week after the collapse of FTX.
Over the holiday season, Southwest Airlines faced a major disruption when a winter storm caused it to cancel over 15,000 flights, leading to hundreds of thousands of stranded passengers. The incident could cost the airline around $700 million in ticket refunds and expenses like hotels and rental cars.
Foxconn, Apple's main production partner, has brought its largest iPhone plant to almost full capacity, indicating that it has secured enough workers despite the resurgence of COVID-19 and recent staff disruptions.
Bed Bath & Beyond has reported a 33% year-on-year decline in sales ending November 28 and has warned that there is significant doubt about its ability to continue as a going concern.
Samsung's profits have declined significantly, possibly indicating that the global economic slowdown is having a larger impact on electronics demand than expected. The company has been struggling with weak demand for memory chips, smartphones, and displays due to consumers reducing holiday spending in the face of rising interest rates and inflation.
Tesla will pay more for the lithium used in its electric vehicles after an amended deal with its supplier, Piedmont Lithium. Piedmont will now supply Tesla with 125,000 metric tons of lithium concentrate through the end of 2025, with prices determined by market prices rather than being fixed as in previous agreements.

And more

A decrease in the production of cardboard and falling prices for the material are signs that global trade is slowing down. Packaging paper products are used at nearly every stage of a product's journey through the supply chain, making it a key indicator of economic performance.
Large trucks and buses in California that were made prior to 2010 and weigh at least 14,000 pounds are no longer allowed to operate on California roads. This represents about 10% of the commercial motor vehicles operating in the state.

Tweets

The Fed is about to raise rates to 5%, & the ECB and other Central Banks will hover around 4%.

These high risk-free yields are available to investors via T-bills.

Like never in the last 10 years, in 2023 you are paid to be patient.

And they say patience is a great virtue.
— Alf (@MacroAlf) January 4, 2023

Foreign Central banks are no longer funding the majority of Treasury bond issuances-

which means we'll have to.

this recession will not be like the others... pic.twitter.com/qnmAjDdqxt
— Peruvian Bull (@peruvian_bull) January 3, 2023

"Sales of China’s top 100 real estate developers sank over 40 percent last year from 2021 as the property market faced great downward pressure."https://t.co/YH3rF6S5or
— Michael Pettis (@michaelxpettis) January 3, 2023

Another example of how financial conditions are tightening — lending standards are increasing. This often increases the risk of a recession as capital isn't just more expensive, it's harder to obtain. Not the best situation for an economy that runs primarily on debt. pic.twitter.com/oRzdqGm5ap
— Markets & Mayhem (@Mayhem4Markets) January 1, 2023

Early gift for the White House: an absolutely perfect PCE inflation print, with core at 2% (!) target. War is over, if you want it.

Many, including myself, were worried about divergence with CPI; and PCE is what the Fed actually watches. But that didn't happen.

Let's dig in. /1 pic.twitter.com/auCAcxUdGX
— Mike Konczal (@mtkonczal) December 23, 2022

Blackstone is basically subordinating and diluting existing shareholders to guarantee UCI's return in exchange for UCI providing liquidity for redemptions. Very Ponzi-adjacent. https://t.co/l6b8lSRjhI
— Cornelius X. Carroll (@CXCarroll) January 3, 2023

That's all for now. We'll be back in your inbox soon with more coverage. Take care!