Aurelia Butler

Investing.com — Markets breathe a sigh of relief as a weekend passes without a major banking disaster. The FDIC takes an estimated $20 billion hit on resolving Silicon Valley Bank. and Alibaba’s Jack Ma returns to China after a year away. 1. First Citizens buys SVB’s loansGlobal markets are breathing a sigh of relief after the first weekend in three weeks to have gone by without a major upheaval in the global banking sector. Germany’s Deutsche Bank (ETR:DBKGn), which was at the heart of Friday’s volatility, has led what can only be described as a dead-cat bounce overnight in Europe, whose weakness is a clear sign that investors continue to treat the sector with caution.Elsewhere overnight, Saudi National Bank replaced its chairman, whose ill-judged comments fast-forwarded Credit Suisse’s slow-motion train wreck.In the U.S., meanwhile, Raleigh, N.C.-based First Citizens BancShares (NASDAQ:FCNCA) agreed to buy most of Silicon Valley’s loan book and securities – and assume all of its deposits – from the Federal Deposit Insurance Corp., which estimated that winding down the rest of the failed bank will cost its deposit insurance fund $20 billion.The FDIC is having to hold on to nearly half of SVB’s assets, but will receive up to $500M in equity instruments in First Citizens as part of a scheme to share losses and profits from the asset recovery process.2. Euro credit slows sharply but German Ifo hits 13-month highThe weakness of the Eurozone bank bounce can partly be explained by stark evidence of the recent improvement in their fundamentals plateauing out. Private-sector credit in the Eurozone grew at only 3.2% – the slowest rate in two years – in February, as successive interest rates took a delayed toll on lending. Loan growth to non-financial corporates slowed to 5.7%, its lowest in 10 months.The figures are the latest evidence that interest rate hikes in Europe and the U.S. are tightening financial conditions, a process that is likely to be made worse as banks’ own risk appetite weakens in the wake of the SVB and Credit Suisse collapses.There was better news from the Eurozone’s largest economy. Germany’s closely-watched Ifo survey delivered a rise in the Business Climate index to its highest since February last year, with the expectations component picking up particularly sharply.3. Stocks set to open higher; Chinese tech ADRs in focus as Ma returns homeU.S. stock markets are set to open higher later and are due for a day of sentiment-driven trading in the absence of major economic data or earnings.By 05:25 ET (09:25 GMT), Dow Jones futures were up 102 points, or 0.3%, while S&P 500 futures were up by a similar amount and Nasdaq 100 futures were up by 0.1%. Despite the volatility in the banking sector, all three major cash indices had notched gains of between 1% and 2% last week.Stocks likely to be in focus later include Chinese ADRs, after the much-publicized return of Alibaba (NYSE:BABA) founder Jack Ma to China. Ma had been away for over a year, in what many had seen as a precaution against his arrest as part of the Communist Party’s crackdown on over-powerful tech barons. His return is accordingly likely to be seen as something of a rapprochement between business and politics.4. Putin deploys tactical nukes to BelarusRussian President Vladimir Putin said he would deploy some of the country’s tactical nuclear weapons arsenal to neighboring Belarus, ratcheting up the tension on the borders of Ukraine.The move comes less than a week after Chinese President Xi Jinping – who has publicly warned Putin about the risks of nuclear escalation – left Moscow with warm words of support but no major deals to boost either Russia’s war effort or its struggling economy.Kyiv said it will seek an emergency meeting of the UN’s Security Council to counter Russia’s “nuclear blackmail”, while EU foreign policy chief Josep Borrell said that Brussels was ready to impose new sanctions on Belarus if Minsk hosted Russian nuclear weapons.5. Oil drifts as China industry laborsCrude oil prices drifted in overnight trading after more underwhelming data from China suggesting that the initial bounce to commodities from the country’s reopening has played itself out.By 05:35 ET, U.S. crude futures were up 0.5% at $69.59 a barrel, while Brent was up 0.5% at $74.95 a barrel.Earlier, China’s statistics office had said that industrial profits were down 23% on the year in the first two months of 2023. More

BUDAPEST (Reuters) – Soaring inflation is taking the steam out of Hungary’s wedding market, supercharged in recent years by Prime Minister Viktor Orban’s lavish family support measures, with the number of weddings plunging to a nine-year-low at the start of 2023.Nationalist Orban, in power since 2010, has launched tax breaks, housing support schemes and cheap loans worth some 5% of economic output per year for newly weds to arrest Hungary’s demographic decline, while strongly opposing immigration.The measures have fuelled a boom in recent years that has lifted Hungary to the top of the European Union matrimony table at 6.9 weddings per 1,000 people in 2020 based on Eurostat figures, the latest comparable statistics.The impact was so strong that sociologists say Hungary was the only country in the world where the number of weddings did not fall during the COVID-19 pandemic in 2020.But the situation appears to be changing with Hungary now projected to run the EU’s highest average inflation rate at 16.4% this year amid surging food, power and services prices, driving up the cost of nuptials and eroding the value of Orban’s support measures.In January the number of weddings recorded in Hungary fell to 1,230, preliminary data showed – the lowest number since January 2014.Livia Murinko, a senior research fellow at the Hungarian Demographic Research Institute, says high inflation has contributed to a fall in the number of weddings after the boom years fuelled largely by all the related government handouts.”Nearly anyone who could potentially get married has already done so,” she said. “We did not think that this wedding boom would be so strong and prolonged, but it will now probably return to equilibrium.”Kinga and Sandor Urban-Szabo, who put off their wedding plans due to COVID-19, say their budget for the event has now surged to nearly four times what they were planning to spend in 2020, as the annual inflation rate hit 25.4% – the highest in central Europe.Others are scaling back their wedding plans or even scrapping receptions altogether. Stunned by the costs, many couples do not even respond to emailed quotes, service providers say.Mihaly Toth, a master of wedding ceremonies, says the number of couples planning to tie the knot is likely to fall from last year’s levels.”Costs have skyrocketed,” Toth said. “This obviously deters many couples from arranging wedding feasts.”Timea Szabo, 23, and her fiance, who got engaged in 2020, were also forced to forego a wedding reception due to the steep rise in costs, with relatives tasked with the preparing the wedding dress and taking photographs.”We will just have a small family get-together and then go out with some friends for the night,” Szabo said. More

Russia is Kazakhstan’s main trading partner and after the West barred sales of thousands of goods to Moscow over its invasion of Ukraine, some Kazakh businesses started purchasing such items and reselling them to Russian firms.The Astana government, however, has pledged to uphold the sanctions, and said on Monday that the new rules, effective from April 1 and applying to exports within the Russia-led Eurasian Economic Union, would reduce “underground” trade.”(The procedure) rules out the filing of documents by figureheads, fake senders or recipients,” it said in a statement.Kazakh exports to Russia jumped by a quarter last year, and Kazakh businessmen say a move by Turkey to crack down on Russian “parallel imports” had prompted a fresh wave of requests from Russians seeking goods they cannot purchase directly. More

China will levy a 20% income tax for small firms with annual sales not exceeding 1 million yuan ($145,340.39), effective from the start of 2023 to the end of 2024, the ministry said in a notice.Small firms to enjoy the lower tax – versus the standard 25% rate – need to have annual taxable income not exceeding 3 million yuan, the number of employees not exceeding 300, and total assets not exceeding 50 million yuan, the ministry said.It will also halve personal income tax for household businesses with annual sales not exceeding 1 million yuan.The government has promised to improve its tax preferential policies this year, offering more tax cuts and refunds, to support the economy that is recovering steadily from one of worst showings in nearly half a century last year.($1 = 6.8804 Chinese yuan renminbi) More

MUMBAI (Reuters) – India has asked state-run lenders to adopt stricter monitoring of top corporate loan accounts and submit a plan to deal with business risks in key areas within two weeks, three banking sources said on Monday. Indian banks, in the past, have had to take deep haircuts on their exposure to debt-laden companies admitted under bankruptcy legislation. “Bankers were told that it would be prudent to increase stress-testing of large corporate loan accounts,” a banker at a state-run bank said.Banks were also asked to monitor the mark-to-market impact on their trading books amid rising interest rates and maintain their liquidity ratios, the sources added.None of the sources wanted to be named because they are not allowed to speak to media. Finance ministry officials met state-run bank chiefs on Saturday, with lenders asked to identify stress points, including “concentration risks and adverse exposures,” according to a government statement. The Finance Ministry did not respond to a Reuters email seeking additional details from the meeting.Lenders were also asked to increase the frequency of assessing their asset-liability profiles amid the global banking turbulence, another banker said.The collapse of some U.S. regional banks have led to concerns about lenders globally having to field possible losses on their held-to-maturity portfolios.Reuters had earlier reported that the government had sought details of the bond portfolios of these banks as a precautionary exercise.India’s banking system continues to be stable and resilient, and lenders have built sufficient buffers to shield themselves from any unforeseen stress, the Governor of the Reserve Bank of India said earlier in March. More

But don’t bet on it. Regional U.S. banking stocks remain near their lowest levels in two years, Europe is weighing up the fallout from the forced UBS-Credit Suisse tie-up. And data will show how much the market ructions are making recession more likely.Here’s a look at the week ahead in markets from Kevin Buckland in Tokyo, Lewis Krauskopf in New York and Naomi Rovnick, Amanda Cooper and Dhara Ranasinghe in London.1/ A COCO-NUTS QUARTERWhat a quarter. January saw the biggest rush into equities for the first month of the year on record as investors loaded up on cheap stocks. With “peak rates” essentially priced in, bond yields at multi-year highs suddenly looked juicy. The threat of inflation looked less severe and growth more robust. Crisis averted!Fast-forward a few weeks and a slew of crypto-companies have folded, U.S. regional banks stocks have tanked in the wake of Silicon Valley Bank collapse and 167-year old Credit Suisse has imploded – and the writedown of some of its contingent convertible bonds (CoCos) has whipped market volatility into a 2008-style frenzy.”Peak rates” is coming faster than many expected, not because inflation has been vanquished, but because central banks are wary of fanning the flames of a credit crunch, right as the banking sector wobbles.GRAPHIC: Asset performance – Q3 2023- https://www.reuters.com/graphics/GLOBAL-MARKETS/mopakwdwnpa/chart.png2/ DON’T BANK ON ITThe collapse of Silicon Valley Bank, a 90% share price drop over two weeks in beleaguered First Republic Bank (NYSE:FRC) and a shotgun marriage between Credit Suisse and UBS to avert a wider crisis: banks have gone on a wild ride. The turmoil may not be over yet. Shares of Germany’s largest bank Deutsche Bank (ETR:DBKGn) plunged on Friday while wider indicators of financial market stress were also flashing.SNB chief Thomas Jordan reckons the next two weeks will be vital to securing UBS’s Credit Suisse takeover. Fed Chair Jerome Powell said banking stress could trigger a credit crunch with “significant” implications for a slowing U.S. economy.And even as central banks and governments step in to stem signs of panic, there’s a new challenge to grapple with – a social media-driven bank run that can be hard to control once rumour and fear take hold.As Citigroup (NYSE:C) chief executive Jane Fraser puts it, social media is a “complete game-changer” in bank runs. Meanwhile, Swiss financial regulator FINMA said it was considering whether to take disciplinary action against Credit Suisse managers. GRAPHIC: Over $95 billion in market value wiped out in 2 weeks- https://www.reuters.com/graphics/GLOBAL-BANKS/USA/myvmobkeovr/graphic.jpg3/ DID YOU SAY AT1? Credit Suisse’s forced takeover by UBS involved $17 billion of Additional Tier 1 debt, shock absorbers if a bank’s capital levels fall below a threshold, being wiped out. Prices of banks’ AT1s bonds tumbled following the news. Hong Kong, Singapore, the European Union and Britain stepped into to calm the unease.Potential legal action is also possible after Swiss authorities ruled that holders of Credit Suisse AT1 bonds would get nothing in the deal. Shareholders, who usually rank below debt investors when a company becomes insolvent, will receive $3.23 billion. Lawyers are assessing whether there is a case against the Swiss authorities. How this plays out in coming days will be watched closely.The saga has also rocked the $275 billion AT1 bond market, as investors scrutinise debt prospectuses for clauses that could cast doubt over recovery prospects. GRAPHIC: CoCo crisis- https://www.reuters.com/graphics/GLOBAL-MARKETS/zjpqjnokxvx/chart.png4/ DATA DIVE    U.S. data that will give insight into the health of the consumer and the state of inflation is timely for investors trying to weigh up whether the economy can stave off a downturn.    The banking crisis has prompted fears that lending will slow, grinding the gears of the economy.     March’s reading of consumer confidence is due on Tuesday. The index unexpectedly fell in February.    On Friday, the February personal consumption expenditure index will offer another look at inflation. It accelerated in January, feeding fears about a more hawkish Federal Reserve.    The Fed raised rates by another quarter point on Wednesday, but recast its outlook from a hawkish preoccupation with inflation to a more cautious stance, given market turmoil that has tightened financial conditions.GRAPHIC: Powell’s balancing act Powell’s balancing act- https://www.reuters.com/graphics/USA-PCE/T5/mopakwwgbpa/chart.png 5/ INFLATION WATCH Incoming Bank of Japan Governor Kazuo Ueda will be watching latest Tokyo inflation data closely. After all, Ueda has the weight of his predecessor’s decade of massive stimulus on his shoulders when he takes over in April.    Expectations are high that he will mastermind a delicate unwinding of yield curve controls and negative interest rates during his tenure, but a key question is when.    Ueda is in no rush, but pressure is building.    The release of Tokyo CPI for March on March 31 is likely to show inflation has topped the BOJ’s 2% target for a 10th straight month. And wage inflation shows signs of catching up.     But policymakers say the economic recovery remains fragile. And U.S. and European banks turmoil show how quickly a crisis can surface, giving Ueda even more reason for caution. GRAPHIC: Tokyo CPI tops BOJ target for the 11th month- https://www.reuters.com/graphics/JAPAN-ECONOMY/INFLATION/gdpzqknjbvw/chart.png (Graphics by Prinz Magtulis, Vincent Flasseur, Riddhima Talwani; Compiled by Dhara Ranasinghe; Editing by Bradley Perrett) More

The global wind sector will face a supply chain crunch this decade, as looming bottlenecks for key components and ships are set to squeeze the sector, an industry body has warned. The Global Wind Energy Council said “spare capacity” in wind energy manufacturing was “likely to disappear by 2026”.The squeeze will hit the US and Europe particularly hard as they both target an ambitious rollout of domestic renewable energy projects even as much of the wind industry’s supply chain is concentrated in China, the group said. Companies were already feeling the crunch, with Singaporean shipping group Marco Polo warning of a “big vacuum” of the large vessels required to install offshore turbines. Growing demand for new wind projects meant that “this problem is now becoming more acute”, said Sean Lee, chief executive of Marco Polo Marine Group. European wind turbine manufacturers including Vestas and Siemens Gamesa endured a bruising 2022, as a combination of rising input costs, supply chain constraints and the slow permitting process for new projects hit profits and caused delays. GWEC said 2022 had been the third best year for new wind capacity installations despite the tough conditions, and forecast that 2023 would be the year the world reached 1TW of total installed wind capacity.However, it warned that policymakers “need to act now to avoid a supply chain bottleneck stalling the deployment of wind energy from 2026”. There was an “urgent need” to increase investment in the global onshore and offshore wind sector supply chains, it added.Many companies were “not in a position to invest to the degree that they should be because they haven’t made money for the last few years”, said GWEC’s chief executive Ben Backwell.Attempts by European and US lawmakers to encourage a shift of manufacturing away from China, in key sectors including renewable energy, risked amplifying the shortages, GWEC warned. Shortages for key components such as wind turbine nacelles, which contain the gearbox, generator, and brake and blades, were likely to emerge, the report added. Europe’s offshore turbine nacelle assembly capacity would “no longer be able to support growth outside of Europe” from 2026, and by 2030 it would need to double from current levels “to meet European demand alone”, GWEC said.China accounts for about 60 per cent of total onshore and offshore nacelle production. There are no offshore nacelle assembly facilities in North America, though companies including GE Renewable Energy and Vestas have recently announced US investment plans. More

Conventional wisdom tells us the technology boom is over. The collapse of Silicon Valley Bank has sent a chill through the investment community, and the tech sector has seen a correction as interest rates have risen. But I’d argue we may be about to enter a new golden age of technological innovation and investment. The difference is that this time around, it won’t be about consumers, but industry.Three-quarters of the world’s $100tn in gross domestic product is made up of traditional legacy industries — such as manufacturing, transportation, logistics and healthcare — that have yet to be deeply transformed by technology. That’s now changing, as part of what venture capitalist Greg Reichow, a partner at Eclipse Ventures, a Palo Alto firm that has $3.8bn invested in the digital transformation of physical industries, calls “industrial evolution”.Two weeks ago, I visited one of Eclipse’s 70 portfolio companies outside Boston. VulcanForms, an additive manufacturing firm, takes Henry Ford’s River Rouge factory model, in which steel went into one end of a production line and finished cars came out the other, and replicates it across multiple industries by 3D printing with metals to create parts. VulcanForms can produce tens of thousands of parts for a jet engine one day, then switch to doing medical implants or consumer electronic components within a matter of hours. “The knowledge of how to make the part lives in the software,” says Reichow. This allows a digital manufacturer like VulcanForms to become a River Rouge for multiple industries. Large industrial customers can focus on their core R&D, sales and marketing, rather than production, which could theoretically now be outsourced not to hundreds of suppliers in dozens of countries, but to individual factories located anywhere customers are.It’s a big shift, and manufacturing is just one part of it. The desire of most companies to increase resilience in their supply chains, coupled with the digitisation of industry, has increased local production capacity in strategic sectors. A legislative push to deal with climate change may well create a new tech boom in the industrial sector. Numerous investment funds are being raised to support the growth of high-tech start-ups in advanced manufacturing, mobility, energy and other areas associated with re-industrialisation.“Everything we see around us, with the exception of ourselves and the food we grow, is manufactured,” notes MIT Professor John Hart, a co-founder of VulcanForms. “Now, post-pandemic, several forces are aligning to reshape how we make things. We understand the need for agile supply chains. We realise how important production is for our economic and national security. And third, we need to decarbonise, which will require the growth of new manufacturing systems at scale.” Since areas like industry, power and transport are responsible for 70 per cent of carbon emissions, changing the way we make things will be crucial to achieving climate change goals. Printing layers of metal, for example, requires a fraction of the energy and carbon load of cutting parts out of a block of solid material.Technology investors see huge opportunities in the shift. Former White House supply chain policy adviser Elisabeth Reynolds — who spent much of the past two years sorting out port backups and baby food formula shortages — has left the Biden administration to join Unless, an investment fund that plans to plough up to $100mn a year into start-ups focused on industrial transformation. This includes things like additive manufacturing and materials science, but also sensors, robotics, AI and software that will help digitise America’s vast number of small and medium-sized industrial companies.Right now, those firms tend to be highly siloed. But in the world that people like Hart, Reynolds and Reichow envision, they would be connected just as consumers are on the internet, able to share resources and information seamlessly in a new industrial smart grid. The productivity and growth opportunities are obvious. “This isn’t about filters that let you turn cats into dogs,” says Reynolds. “Technology innovation around re-industrialisation is very different, and we are on the cusp of a real revolution in that area.” Indeed, I think we may be at a pivot point rather like 2007. Back then, the introduction of the iPhone led to huge growth in consumer technology. The “app-economy” evolved and changed the entire way we communicate, work, play and shop. Business is about to go through something similar, a long-anticipated shift sped up by decoupling, the pandemic and war in Ukraine. It’s a transformation that will change the nature of our economy. It’s also a big reason I’m still long the Nasdaq, even though there may yet be a bigger short-term correction.One unresolved question is whether the new industrial revolution will be a jobless one. Tech talent is starting to migrate away from consumer software and into industry. But AI, along with the dramatically reduced human labour needs of high-tech factories, has reduced the number of people needed to do this work. Still, it’s worth noting that the app economy created job categories that hadn’t existed before. If we are lucky, a new industrial revolution will do the same in ways that have yet to be [email protected] article has been amended to correct the spelling of Elisabeth Reynolds More