The fate of the global economy is literally down to who blinks first.
The fate of the global economy is literally down to who blinks first
March 13 (King World News) – Peter Boockvar: The fate of the global economy is literally down to who blinks first as energy is the lifeblood of commerce. I just read this from an article in Reuters, “US intelligence indicates that Iran’s leadership is still largely intact and is not at risk of collapse any time soon after nearly two weeks of relentless US and Israeli bombardment, according to three sources familiar with the matter.”
Further, “A ‘multitude’ of intelligence reports provide ‘consistent analysis that the regime is not in danger’ of collapse and ‘retains control of the Iranian public,’ said one of the sources, all of whom were granted anonymity to discuss US intelligence findings. The latest report was completed within the last few days, the source said.”
Here is the update with global container shipping prices where the Red Sea is now again a dangerous place to be traversing because of the Houthi threat but we know the Hormuz Strait is the real risk. The Shanghai to NY trip rose $103 to $3,080, though still remains low. A similar rise took place in the route to LA. Shanghai to Rotterdam saw the biggest rise, jumping by 19% w/o/w to $2,443.
Global bonds continue to be no safe haven as inflation eats into their appeal. Ahead of an expected rate increase next week from the RBA, Aussie yields are jumping higher. Their 2 yr yield rose 8 bps to 4.51%, the highest since 2011. The 10 yr was up by 10 bps to 4.95%, matching a 15 yr high. Yields moved higher in Japan (BoJ meets next week but is not expected to move, maybe instead in April). The German 10 yr bund yield is just 3 bps from also a 15 yr high.
With respect to US Treasuries, inflation breakevens continue to pop, with the 2 yr up 9 bps yesterday to 3.12%. The 5 yr was up 4 bps to 2.64% and the 10 yr a more modest 3 bps to 2.38%.
I hear from some that somehow the Fed should look through this, of course depending on the sustainability of the commodity price move, but because oil and gas prices filter through to so many other things, how can they realistically do that? I know, this is a supply shock and not your typical fiscal largesse combined with easy monetary policy stoking inflation but still.
Energy Stocks Leading The Way
Otavio Costa: Energy stocks are leading the market again, yet many investors still think this is just a short-term trend.
It’s not.
Here is an important reminder:
Most oil companies are generating free cash flow near historical highs with WTI above $80.
This likely marks the early stages of a much larger long-term move, in my view.
tavicosta.substack.com/p/the-physical-economy-is-back
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