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    ‘Nationalizing bond markets’ left central banks unprepared for inflation, top HSBC economist says

    Central banks around the world have hiked interest rates aggressively over the past year in a bid to rein in soaring inflation, after a decade of loose financial conditions.
    “Part of the problem with QE was the fact that you’re basically nationalizing bond markets. Bond markets have a very very useful role to play when you’ve got inflation, which is they’re an early warning indicator,” HSBC Senior Economic Adviser Stephen King told CNBC’s Steve Sedgwick.

    One Canada Square, at the heart of Canary Wharf financial district seen standing between the Citibank building and HSBC building on 14th October 2022 in London, United Kingdom.
    Mike Kemp | In Pictures | Getty Images

    The prolonged period of loose monetary policy after the global financial crisis equated to central banks “nationalizing bond markets,” and meant policymakers were slow off the mark in containing inflation over the past two years, according to HSBC Senior Economic Adviser Stephen King.
    Central banks around the world have hiked interest rates aggressively over the past year in a bid to rein in soaring inflation, after a decade of loose financial conditions. The swift rise in interest rates has intensified concerns about a potential recession and exposed flaws in the banking system that have led to the collapse of several regional U.S. banks.

    Speaking to CNBC at the Ambrosetti Forum in Italy on Friday, King said that while quantitative easing had benefited economies trying to recover from the 2008 financial crisis, its duration meant that governments were “probably far too relaxed about adding to government debt.”
    “Part of the problem with QE was the fact that you’re basically nationalizing bond markets. Bond markets have a very very useful role to play when you’ve got inflation, which is they’re an early warning indicator,” King told CNBC’s Steve Sedgwick.

    “It’s a bit like having an enemy bombing raid and you turn off your radar systems — you can’t see the bombers coming along, so effectively it’s the same thing, you nationalize the bond markets, bond markets can’t respond to initial increases in inflation, and by the time central banks spot it, it’s too late, which is exactly what I think has happened over the last two or three years.”
    The U.S. Federal Reserve was slow off the mark in hiking interest rates, initially contending that spiking inflation was “transitory” and the result of a post-pandemic surge in demand and lingering supply chain bottlenecks.
    “So effectively you’ve got a situation whereby they should have been raising interest rates much much sooner than they did, and when they finally got round to raising interest rates they didn’t really want to admit that they themselves had made an error,” King said.

    He suggested that the “wobbles” in the financial system over the past month, which also included the emergency rescue of Credit Suisse by Swiss rival UBS, were arguably the consequence of a prolonged period of low rates and quantitative easing.
    “What it encourages you to do is effectively raise funds very cheaply and invest in all kinds of assets that might be doing very well for a short period of time,” King said.
    “But when you begin to recognize that you’ve got an inflation problem and start to raise rates very very rapidly as we’ve seen over the course of the last couple of years, then a lot of those financial bets begin to go rather badly wrong.” More

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    China’s banking troubles are not the same as Silicon Valley Bank, economist says

    China’s small banks have problems — but they don’t carry the same risks as those exposed by the collapse of Silicon Valley Bank, said Zhu Min, vice president of the China Center for International Economic Exchanges, a state-backed think tank.
    Issues at a handful of smaller Chinese banks have emerged in the last few years.
    He pointed out that while those Chinese banks’ structure and operations were unclear, they did not pose systemic risks to the broader economy.

    A Silicon Valley Bank office is seen in Tempe, Arizona, on March 14, 2023. – With hindsight, there were warning signs ahead of last week’s spectacular collapse of Silicon Valley Bank, missed not only by investors, but by bank regulators. Just why the oversight failed remained a hot question among banking experts, with some focusing on the weakness of US rules. (Photo by REBECCA NOBLE / AFP) (Photo by REBECCA NOBLE/AFP via Getty Images)
    Rebecca Noble | Afp | Getty Images

    BO’AO, China — China’s small banks have problems — but they don’t carry the same risks as those exposed by the collapse of Silicon Valley Bank, said Zhu Min, vice president of the China Center for International Economic Exchanges, a state-backed think tank.
    Issues at a handful of smaller Chinese banks have emerged in the last few years.

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    Baoshang Bank went bankrupt, while some rural banks in Henan province froze accounts, prompting protests by customers worried about their savings.
    Those banks’ problems reflect local issues, Zhu said Wednesday. He pointed out that while those Chinese banks’ structure and operations were unclear, they did not pose systemic risks to the broader economy.
    After the last three to four years of Chinese regulatory action, the situation has also improved, Zhu said.
    China’s major banks — known as the big five — are owned by the central government and rank among the largest in the world.
    On the other hand, SVB reflects a macro risk, Zhu said, noting the U.S. mid-sized lender had adequate capital and liquidity before it collapsed.

    Macro risks present a much more worrisome problem, he explained. The banking crisis in the U.S. involved a structural risk from savers moving funds to take advantage of higher interest rates, Zhu pointed out.
    The U.S. Federal Reserve has aggressively hiked interest rates in an attempt to ease decades-high inflation in the country. The U.S. dollar has strengthened against other currencies, while Treasury yields have risen to multi-year highs.

    The current U.S. banking problem contrasts with the 2008 financial crisis that stemmed from Lehman Brothers’ exposure to mortgage-backed securities, he added.
    Zhu, formerly deputy managing director of the International Monetary Fund, was speaking with reporters on the sidelines of the Boao Forum for Asia on Wednesday. The annual event hosted by China is sometimes considered Asia’s version of Davos.
    The forum this year emphasized the need for cooperation amid global uncertainty — and highlighted China’s relative stability in its emergence from the pandemic.
    China’s economy in 2022 grew by just 3%, the slowest pace in decades, as the real estate slump and Covid controls weighed on growth. The country ended its stringent zero-Covid policy late last year, and has been trying to attract foreign business investment.

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    Consumption remains a clear weak spot in China’s economy, Zhu said. He expects advanced manufacturing and China’s push for reducing carbon emissions to remain growth drivers.
    Private, non-state-owned companies have taken the lead in China’s so-called green transformation, Zhu said.
    Chinese President Xi Jinping and new Premier Li Qiang have spoken repeatedly in the last few weeks about support for privately run businesses.
    Xi has said he saw increased unity under the ruling Chinese Communist Party as necessary for building up the country.
    New rules released this month give the party a more direct role in regulating China’s financial industry.
    Zhu said he expects this overhaul to streamline financial oversight, and warned of a period of adjustment. However, he said that overall, it would make financial regulation more efficient and transparent in China.
    Correction: This story has been updated to accurately reflect that China’s major banks are known as the big five. More

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    Food at your favorite ballpark is probably going to be more expensive

    One of the nation’s top catering and hospitality companies is adjusting its menus and ingredients to bring down food costs.
    Among the areas seeing the harshest pricing pressure: ballpark hot dogs and plastic packaging.
    Sodexo Live CEO Belinda Oakley said the company is expanding the number of value menu items it offers.

    Sodexo Live, a food and hospitality company, says food inflation is also hitting the ballpark
    Courtesy: Seattle Mariners

    Those peanuts and Cracker Jacks may soon cost you more at the ballpark, thanks in part to food inflation, the CEO of a top hospitality company told CNBC.
    “It doesn’t matter what industry you’re in, everybody is noticing prices going up, and scarcity being an issue in certain product lines,” said Belinda Oakley, Sodexo Live CEO. “Of course, we were no exception to that.”

    Sodexo Live operates food, beverage and hospitality services at Seattle’s T-Mobile Park as well as 200-plus sports, cultural and entertainment properties throughout the U.S. Oakley said the company’s scale, and the fact that it has about $20 billion in purchasing power, is helping to mitigate some of the inflationary pressure.
    Still, higher costs have forced Sodexo Live to get creative with its menus and food selection.
    Sodexo Live is changing some ingredients, mixing up its suppliers, and sourcing more items locally to help reduce costs and avoid passing along 100% of the price increases to the consumer, Oakley said.
    “It will still be a phenomenal experience for the fan, but might be more cost-engineered to make sure that we’re not outpricing them from the market,” she said.
    At T-Mobile Park, the company is expanding the number of value menu items it offers, priced between $2 and $4, to a dozen items, up from seven last year.

    One big item that could see sticker shock: ballpark franks, which also happen to be a top-selling concessionary item for Sodexo Live. Oakley cited higher supply chain costs, including packaging and labor, for driving up meat prices.

    Sodexo Live says they are trying to be more creative with their offerings to prevent customers from having to pay more.
    Courtesy: Seattle Mariners

    Location matters, though, according to Oakley, and prices vary depending on your geography. The distance between a ballpark and a vendor can make a big difference, as can market pricing. For example, if you look at pricing last year for the average price of a hot dog — it was most expensive on the West Coast, with the San Francisco Giants charging $7.50.
    “You’re going to see a higher cost impact in California than you’re gonna see in Indiana,” Oakley said.
    Another area that is experiencing harsh pricing pressure, Oakley said, is plastics and disposables: materials in preparing food that’s transportable.
    “The Russia-Ukraine war has had a huge impact,” she said. For example, the price of resin, a key ingredient in making disposables, has been hit particularly hard.
    But when it comes to pricing, the company is keeping the long game in mind.
    “We need consumers to continue to want to have these experiences outside of their day to day and to use their discretionary spend to actually go and enjoy hospitality,” she said. More

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    Bank of America’s Andy Sieg is joining Citi as head of global wealth

    Previously, Andy Sieg was president of Merrill Lynch Wealth Management, a post he’s held for six years.
    In his new position, he will be the head of Citi Global Wealth, reporting to Jane Fraser, CEO of Citi.
    Sieg will begin his new role in September.

    Scott Mlyn | CNBC

    Andy Sieg, a veteran of Merrill Lynch, is parting ways with Bank of America to join Citigroup.
    He will be the new head of Citi Global Wealth, reporting to Jane Fraser, the bank’s CEO. Sieg will begin his new role in September, as he is required to take a six-month leave before starting the new position, according to an announcement from Fraser.

    “Growing Wealth is a core pillar of our strategy and will improve our business mix by adding more fee-based revenue and drive improved returns,” Fraser said in the announcement. “In my conversations with Andy, it is clear to him that our team is on a mission to transform Citi — and he is highly driven and motivated to play a central role in our firm’s leadership.”
    Previously, Sieg was president of Merrill Lynch Wealth Management, a post he’s held for six years. He was also a member of Bank of America’s executive management team. The bank acquired Merrill during the throes of the great financial crisis.
    Separately, Bank of America announced that Lindsay Hans and Eric Schimpf have been appointed presidents and co-heads of Merrill Wealth Management. They will report to Bank of America CEO Brian Moynihan.
    -CNBC’s Hugh Son contributed reporting. More

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    Russia detains Wall Street Journal reporter, plans to hold him until late May

    Russian authorities detained Wall Street Journal reporter Evan Gershkovich.
    Russia is one of the worst countries in the world for press freedom, according to watchdogs.

    An undated ID photo of journalist Evan Gershkovich. – A US reporter for The Wall Street Journal newspaper has been detained in Russia for espionage, Russian news agencies reported Thursday, citing the FSB security services.
    – | Afp | Getty Images

    Russian authorities plan to detain an American journalist who works for The Wall Street Journal for two months.
    The reporter, Evan Gershkovich, was detained on suspicion of espionage, according to Russia’s Federal Security Service. Shortly after, a Moscow court ordered Gershkovich’s detention to last until May 29, according to the Journal, which cited local reports.

    Gershkovich’s detention escalates already high tensions between the United States and Russia. The U.S. government is spending billions to support Ukraine’s defense against invading Russian forces.
    Officials from the White House and the State Department spoke with the Journal Wednesday night regarding Gershkovich’s detention, according to a statement from White House press secretary Karine Jean-Pierre. The Biden administration has also been in contact with Gershkovich’s family, and the State Department has been in direct contact with the Russian government, Jean-Pierre said.
    Secretary of State Antony Blinken said in a statement his agency has been seeking “consular access” to Gershkovich.
    “In the strongest possible terms, we condemn the Kremlin’s continued attempts to intimidate, repress, and punish journalists and civil society voices,” Blinken said.
    The FSB alleged Gershkovich “was collecting information constituting a state secret about the activities of one of the enterprises of the military-industrial complex of Russia.” Gershkovich pleaded not guilty to espionage charges, according to Russian state news agency Tass. If convicted, Gershkovich could face up to 20 years in prison.

    Daniil Berman, the lawyer of arrested Wall Street Journal reporter Evan Gershkovich, speaks to journalists near the Lefortovsky court, in Moscow, Russia, Thursday, March 30, 2023. Russia’s top security agency says an American reporter for the Wall Street Journal has been arrested on espionage charges. 
    Alexander Zemlianichenko | AP

    The Wall Street Journal adamantly denied the charges, adding that it sought “the immediate release of our trusted and dedicated reporter.”
    “We stand in solidarity with Evan and his family,” the Journal said.
    Since January 2022, Gershkovich has worked for the Journal in Moscow. Before that, he reported in the country for AFP and The Moscow Times, according to his LinkedIn account. Prior to that he was a news assistant for The New York Times. 
    Gershkovich’s most recent article, published Tuesday with a co-byline, was headlined “Russia’s Economy Is Starting to Come Undone.”
    Russia is one of the worst countries in the world for press freedom, according to a 2022 index from Reporters Without Borders, a nonprofit advocacy group. It has gotten worse since Russia launched its invasion of Ukraine in early 2022, according to the organization.
    The country’s government has a long history of harassing journalists, including detaining foreigners on spying charges that appear more politically motivated.
    Recently, Russian President Vladimir Putin has overseen a significant crackdown on free speech and political dissent.
    Both Blinken and Jean-Pierre stressed the continued importance of heeding the U.S. government’s warning with regards to U.S. citizens residing in or traveling to Russia.
    “U.S. citizens residing or traveling in Russia should depart immediately, as the State Department continues to advise,” Jean-Pierre said. More

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    Virgin Orbit fails to secure funding, will cease operations and lay off nearly entire workforce

    Virgin Orbit is ceasing operations “for the foreseeable future” after failing to secure a funding lifeline, CEO Dan Hart told employees during an all-hands meeting Thursday.
    The company will lay off all but 100 employees, according to audio of the 5 p.m. ET meeting obtained by CNBC.
    Shareholders unloaded the stock in extended trading Thursday.

    The company’s 747 jet “Cosmic Girl” releases a LauncherOne rocket in mid-air for the first time during a drop test in July 2019.
    Greg Robinson / Virgin Orbit

    Virgin Orbit is ceasing operations “for the foreseeable future” after failing to secure a funding lifeline, CEO Dan Hart told employees during an all-hands meeting Thursday afternoon. The company will lay off nearly all of its workforce.
    “Unfortunately, we’ve not been able to secure the funding to provide a clear path for this company,” Hart said, according to audio of the 5 p.m. ET meeting obtained by CNBC.

    “We have no choice but to implement immediate, dramatic and extremely painful changes,” Hart said, audibly choking up on the call. He added this would be “probably the hardest all-hands that we’ve ever done in my life.”
    The company will eliminate all but 100 positions, amounting to about 90% of the workforce, Hart said, noting the layoffs will affect every team and department. In a securities filing, the company said the layoffs constituted 675 positions, or approximately 85%.
    “This company, this team — all of you — mean a hell of a lot to me. And I have not, and will not, stop supporting you, whether you’re here on the journey or if you’re elsewhere,” Hart said.
    Virgin Orbit will “provide a severance package for every departing” employee, Hart said, with a cash payment, extension of benefits, and support in finding a new position — with a “direct pipeline” set up with sister company Virgin Galactic for hiring.

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    Hart has been giving the company’s employees brief daily updates since Monday, when Virgin Orbit delayed a scheduled all-hands meeting at the last minute. Late-stage deal talks had fallen through with a pair of investors over the weekend, but Hart told staff on Monday that “very dynamic” investment discussions were continuing.

    Those investor discussions continued this week, with Hart earlier saying leadership would share any updates “as quickly and transparently as we can,” noting that leaking emails “is against company policy,” according to copies of Hart’s emails from Tuesday and Wednesday obtained by CNBC.
    The company this week has been steadily bringing back more of its employees from the operational pause and furlough it began on March 15. It initially resumed some work with a “small team” a week later. Amid the broader pause, Virgin Orbit has been working to finish its investigation into the mid-flight failure of its previous launch, as well as finish preparations on its next rocket.
    Shareholders unloaded the stock in extended trading Thursday, with shares selling off more than 40% after the announcement. Virgin Orbit stock closed at 34 cents a share at the end of the regular session, having fallen 82% since the beginning of the year.
    A Virgin Orbit representative did not immediately respond to CNBC’s request for comment.

    Sir Richard Branson poses in front of Virgin Orbit’s rocket manufacturing.
    Virgin Orbit

    Virgin Orbit developed a system that uses a modified 747 jet to send satellites into space by dropping a rocket from under the aircraft’s wing mid-flight. But the company’s last mission suffered a mid-flight failure, with an issue during the launch causing the rocket to not reach orbit and crash into the ocean.
    The company was among a select few U.S. rocket companies to successfully reach orbit with a privately developed launch vehicle. It has launched six missions since 2020, with four successes and two failures.
    It has been looking for new funds for several months, with majority owner Sir Richard Branson unwilling to fund the company further.
    Virgin Orbit was spun out of Branson’s Virgin Galactic in 2017 and counts the billionaire as its largest stakeholder, with 75% ownership. Mubadala, the Emirati sovereign wealth fund, holds the second-largest stake at 18%.
    The company previously hired bankruptcy firms to draw up contingency plans in the event it was unable to find a buyer or investor. Branson has first priority over Virgin Orbit’s assets, as the company raised $60 million in debt from the investment arm of Virgin Group.
    On the same day that Hart told employees that Virgin Orbit was pausing operations, its board of directors approved a “golden parachute” severance plan for top executives, in case they are terminated “following a change in control” of the company. More

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    Nikola announces a $100 million stock offering

    Nikola said it will raise $100 million via a secondary stock offering to the public.
    If the public stock offering raises less than $100 million, a private investor has agreed to buy enough stock to make up the difference.
    The company had about $233 million on hand at year-end.

    U.S. Nikola’s logo is pictured at an event held to present CNH’s new full-electric and Hydrogen fuel-cell battery trucks in partnership with U.S. Nikola event in Turin, Italy, December 3, 2019.
    Massimo Pinca | Reuters

    Electric heavy-truck maker Nikola said on Thursday that it plans to raise $100 million via a secondary stock offering to the public and — possibly — a private sale of stock to an unnamed investor, if needed.
    The company’s shares were down about 5% in after-hours trading following the news.

    Nikola’s plan to raise capital comes in two parts. First, the company said, it will offer up to $100 million worth of stock to the public via a traditional secondary offering, with Citigroup underwriting. Citigroup will have the option to purchase an additional $15 million worth of shares.
    Secondly, Nikola said it has entered into a forward stock purchase agreement with an unnamed investor. If the public offering raises less than $100 million, that investor has agreed to buy the remainder at the public offering price.
    Either way, Nikola will raise $100 million before fees, money that it plans to use for working capital and other general purposes.
    Nikola is slowly ramping up production of its electric semitrucks after building just 258 battery-electric trucks in 2022. The company said last month that it expects to build between 250 and 350 of the battery-electric semis in 2023, along with 125 to 150 of its upcoming fuel-cell-powered trucks, set to launch this fall. The fuel-cell trucks will have longer range than the battery-electric versions.
    Nikola had $233.4 million in cash and equivalents available as of Dec. 31, down from $315.7 million at the end of September. The company lost $222.1 million in the fourth quarter of 2022. More

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    Stocks making the biggest moves midday: Bed Bath & Beyond, EVgo, UBS and more

    A Bed Bath & Beyond store in the Brooklyn borough of New York, US, on Monday, Feb. 6, 2023. Bed Bath & Beyond Inc. said it would shutter another 87 stores in addition to the 150 closures it announced in August. Photographer: Stephanie Keith/Bloomberg via Getty Images
    Stephanie Keith | Bloomberg | Getty Images

    Check out the companies making headlines in midday trading.
    Bed Bath & Beyond – Shares of the home goods retailer dropped 26.2% after the company once again warned it may need to file for bankruptcy as it proposed a $300 million stock offering. The beleaguered company also said the loans it secured last year were downsized.

    UBS — U.S. listed shares advanced 2%. The action comes a day after the bank announced Sergio Ermotti would return as CEO to oversee the takeover of Credit Suisse.
    EVgo – The EV charging network operator surged 22.1% after the company reported fourth-quarter revenue that beat Wall Street estimates, according to Refinitiv. EVgo also highlighted strong year-over-year growth in network throughput.
    Ford — The auto giant gained 2% after Morgan Stanley reiterated its overweight rating, saying the company should be able to show capital discipline.
    Netflix — The streaming giant gained 1.9% in midday trading after Wells Fargo said it thinks the stock could rise 20% from here. Wells noted that the company’s “paid sharing efforts” give the stock exceptional upside, and is also “a key part of the long-term NFLX bull case.”
    Zebra Technologies — Shares climbed more than 4.4% after Zebra Technologies announced a change in leadership. The mobile computing firm said it appointed Joe White as new chief product and solutions officer. Separately, TD Cowen initiated coverage of the stock as outperform.

    Fluence Energy — Shares jumped 14.7% on an upgrade to buy from neutral by Goldman Sachs. The firm said the electric services provider should benefit from the Inflation Reduction Act.
    Philip Morris — Shares rose 2% following an upgrade to overweight from neutral for the tobacco company by JPMorgan. The firm said shares are currently at an attractive price, while noting the company should be able to win market share over time.
    Juniper Networks — The cloud computing network provider added 2% on the back of an upgrade to outperform from in line by Evercore ISI. The firm said the company should exceed expectations in both the near and long term.
    Crocs — Shares rose 4.9% after B. Riley initiated coverage of the stock as a buy, saying the shoe company is underappreciated.
    Interpublic Group of Companies — The advertising agency gained 3.2% following an upgrade to buy from neutral by Bank of America. The firm said the company is well positioned for challenges and described it as a reliable agency holding company.
    Waste Management — Shares traded up 2.9% after TD Cowen initiated the solid waste company at outperform, saying the company and competitors offer steady earnings and cash flow.
    Charles Schwab – Shares of Charles Schwab slid 5% after Morgan Stanley downgraded the financial services giant, citing an extended earnings recovery timeline that makes the risk-reward balance for shares appear less compelling
    Carnival — Shares were up 2.7% as the cruise line stock continued to rally. Shares are up more than 10% for the week and have surged 26% in 2023. Earlier this week, Susquehanna upgraded Carnival to positive from neutral.
    Paycom Software — Shares advanced 3.7% after D.A. Davidson upgraded Paycom Software to buy from neutral. While the Wall Street firm said growth is slowing for the payroll provider, the firm’s analyst Robert Simmons expects that there is “limited downside risk to estimates outside of a severe recession.”
    — CNBC’s Sarah Min, Tanaya Macheel, Yun Li and Brian Evans contributed reporting More