(Justin Vaughn, Editor, Options Trading Report)
The U.S. is ramping up shipments of liquified natural gas to Europe, as the continent mounts a worldwide hunt for ‘new’ supplies to finally phase out total reliance on Russian energy, after Putin’s invasion of Ukraine. The globe-spanning effort to wean Europe off Russian energy supplies was at the forefront of President Biden’s summit with European Union Leaders this week in Brussels. The U.S. aims to ship 50 billion cubic meters of LNG to Europe annually through 2030, making up for about a third of the gas the E U receives from Russia. Western nations want to end the leverage Russia holds over Europe as the continent’s most important energy supplier and cut a lifeline for the Russian economy. “We are exporting right now every molecule that has a terminal available to liquefy it,” said U.S. Energy Secretary Jennifer Granholm. “Because of the price, there is a desire to liquefy it and send it,” she said. The Biden administration is preparing more sanctions targeting Russian companies it says provides goods and services for the military and intelligence services, including duel use components used in weapons proliferation, U.S. officials said. The Treasury Department sanctions, which would be announced next week, are coming as the U.S. and its allies continue to target a range of additional hard-scoring economic sanctions to tighten the chokehold on Putin, since his invasion of Ukraine. Among those expected to be targeted: Serniya Engineering, which the U.S. thinks is at the center of a procurement network engaged in weapons proliferation for Russia’s intelligence services; and Moscow-based Sertall, which the administration says produces equipment and technology for Russia’s military. Those measures “can have a very big impact, which will then spread to the whole Russian economy,” said Justine Walker, who leads global sanctions and risk at the Association of Certified Anti-Money Laundering Specialists. “As you hit those supply chains, you have a pretty immediate effect.” The chokehold gets tighter and Putin’s Russia will suffer, more and more.
U.S. stocks rebounded for a second consecutive week, as investors gained confidence that the economy ‘can handle’ the escalating war in Ukraine– and the Federal Reserve’s plans to increase interest rates (multiple times) to control inflation, and a prolonged pandemic. As noted, ‘the investor’ has digested these events, with no major impact on the indices. The S&P 500 climbed 1.8%, for the week, extending its gains over the past two weeks to 8.1%, the strongest run since late 2020. The technology-heavy Nasdaq Composite rose 2%, extending its two-week rise to more than 10%. The Dow Jones Industrial Average was up 0.3% for the week. Still, a renewed surge in bond sales tempered some of the enthusiasm in the stock market Friday. The S&P 500 added 22.9 points to 4543.06, while the Dow rose 153.3 points to 34861.34. The Nasdaq dropped 22.54 points, finishing at 14169.3. Forecasters and analysts are predicting that the Fed will lift interest rates faster than it currently projects to clamp down on inflation that remains at a multidecade high. Economists at banks including Bank of America and Citicorp this week raised the prospect that the central bank will lift rates by half a percentage point at a time, in contrast to this month’s quarter-point increase. Such forecasts’ have jolted the government bond market. The yield on the benchmark 10-year Treasury jumped to 2.491% from 2.340% on Thursday, the highest level in almost three years. The yield on the three-year note climbed to 2.536% from 2.346% on Thursday. Yields on the five- and seven-year notes closed above 2.5%, reflecting growing expectations that the Fed could raise rates as high as 3% next year and before lowering them later. Consumer confidence for March was below economists’ expectations, according to a University of Michigan survey released Friday. The ‘metric’ has been slipping in recent months as consumers, particularly lower-income households, hold more pessimistic outlooks on the economy.
RUMBLINGS ON THE STREET
Simona Mocuta, chief economist at State Street Global Advisors, Barron’s “The tightening path outlined by the Fed risks triggering a recession in 2023 or 2024. If signs of economic weakness occur,” she says, “the central bank is likely to raise rates fewer times than anticipated in the SEP.”
Yaneer Bar-Yam, president of the New England Complex Systems Institute, Barron’s “Food prices are going up so fast. Chances of social unrest are extraordinarily high, especially as the current shock comes on top of a pandemic,” he says. “When a very strong driver of things is changing quickly, we have to understand that the system is becoming unstable.”
Jeffery Harmening, CEO of Cheerios maker General Mills, said at an investor conference, Barron’s “The current environment is as challenging as I have ever seen. Food demand is elevated, and input-cost inflation is at a multidecade high, pushing prices higher through the end of this year,” he said.
Larry Fink, Blackstone CEO and Chairman, in his 2022 letter to shareholders, Barron’s “The Russian invasion has put to an end the globalization we have experienced over the last three decades.”
THE NUMBERS – Barron’s
8,000 – Number of U.S. diners that closed during the pandemic. Some 6,000 bars also closed
$4.6B – The decline in initial public offerings so far in 2022 from 2021, a hit to Wall Street’s bottom line
4.3% – Oil’s share of global GDP, when crude is $100 a barrel. When oil is above 4% of GDP, users historically tend to seek substitutes.
362 – Ships waiting off ports of Shanghai/Ningbo and Hong Kong/Shenzhen, as congestion clears off Los Angeles/Long Beach