Week InReview
Friday | Mar 4, 2022
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Fed Chair Jerome Powell arriving to begin testifying Thursday in Washington. Photo: Tom Williams/Press Pool |
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Federal Reserve Chair Jerome Powell is making the fight against inflation his top priority over the risks from Russia’s invasion of Ukraine, backing a quarter-point interest-rate rise later this month.
In more than three hours of testimony on Wednesday, Powell was peppered with questions about prices from lawmakers with constituents worried by the rising cost of living. The Fed chair suggested that if inflation doesn’t start to ease, the central bank may have to get tough. Stocks climbed after Powell said the economy is expanding with enough force to withstand rate hikes.
In his second day of testimony on Capitol Hill, Powell cautioned that the Ukraine war could accelerate China’s moves to develop alternatives to the current dollar-dominated international payments infrastructure. Oh, and the central bank is still planning to raise interest rates.
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U.S. Treasury Department building at dusk in Washington, D.C. Photo: Amazon |
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The rush into Treasuries sparked by Russia’s war in Ukraine has exposed fresh signs of weakness in the world’s biggest bond market, adding to pressure on U.S. regulators to detail a reform plan. The latest indications of poor trading conditions include a deterioration in the ability to buy or sell a security without moving its price, market participants say. There’s also a slump in the volume of trading of non-benchmark Treasuries, according to Bloomberg Intelligence. (Bloomberg Markets | Mar 3)
Wall Street stocks rose and a powerful rally in debt markets reversed on Wednesday, as Federal Reserve chair Jay Powell signalled that the U.S. central bank would raise interest rates this month despite economic uncertainty created by Russia’s invasion of Ukraine. (Financial Times | Mar 3)
Western firms appear well insulated against the impact of the sanctions imposed on Russia this week, but energy markets may be more exposed than traders, portfolio managers, and policy makers realized. Whether global markets will fare as well isn’t yet clear. The good news, from the perspective of U.S. finance: The average stock portfolio is hardly exposed to Russian stocks, and U.S. companies have little reliance on Russian revenue. Western banks’ exposure to Russia, meanwhile, has dwindled since the 2014 annexation of Crimea. (The Wall Street Journal | Mar 2)
Faced with an unprecedented level of sanctions on Russia, global banks are taking a dim view of business with all Russian entities and dropping clients if there is even a slight doubt on their ties to that country, said bankers and lawyers. Over the past week, the United States, Canada, Britain and European allies have imposed a raft of sanctions on Russia in retaliation for its invasion of Ukraine, with Australia, Japan, Singapore, Taiwan and South Korea also introducing restrictions. (Reuters | Mar 2)
The Securities and Exchange Commission is scrutinizing creators of NFTs and the crypto exchanges where they trade to determine if some of the assets run afoul of the agency’s rules. A focus of the probe is on whether certain nonfungible tokens, digital assets that can be used to denote ownership of things like a painting or sports memorabilia, are being utilized to raise money like traditional securities. Over the past several months, attorneys in the SEC’s enforcement unit have sent subpoenas demanding information about the token offerings. (Bloomberg Markets - Crypto | Mar 2)
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Wages are the key number to watch in Friday's U.S. jobs report |
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(Mar 3) — The February jobs report on Friday is forecast to show average hourly earnings advanced another 0.5% last month, pushing the year-over-year gain to 5.8%. Excluding two pandemic-distorted prints in 2020, the annual increase would be the strongest in data back to 2007.
While some slowing is expected, wage growth is poised to remain strong in 2022. Along with soaring commodities prices since Russia’s invasion of Ukraine, high labor costs are yet another factor the Federal Reserve will have to contend with as it prepares to raise interest rates to tamp down inflation.
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The website of the Russian Foreign Ministry was among those taken offline by hackers amid the Russia-Ukraine conflict. Photo: Alexander Nemenov | Agence France-Presse | Getty Images |
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Ukraine conflict shows wartime norms don't exist for cyber operations
An impromptu pro-Ukraine "IT Army" and hacks tied to Russia have brought noncombatants into a digital war zone and no one knows how to classify these cyber activities.
SEC to meet on cybersecurity amid fear of Russian threat to financial sector
The Securities and Exchange Commission will meet March 9 to consider changes to its cybersecurity enforcement as lawmakers look to bolster the financial sector from disturbance following the exclusion of Russian banks from the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, and other sanctions against Russian entities.
Senate passes cyber package that would require firms to report hacks
The Senate Tuesday passed a cybersecurity package that would require companies to report damaging hacks and ransomware payments to the government. The Strengthening American Cybersecurity Act comprises three bills intended to bolster public- and private-sector security, including by modernizing federal agencies’ cyber posture and updating how they can adopt cloud-based technologies. Covered firms would have to report designated breaches to the Cybersecurity and Infrastructure Security Agency within 72 hours, as well as ransomware payments within 24 hours.
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Monaco is a playground for Russia’s wealthy. Photo: Jeremy Suyker | Bloomberg News |
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France impounded yachts
How London and the U.S. became safe havens for dirty money
Three books examine how and why financial centers in Britain and the U.S. responded to the challenges of the postwar world by assuming the role of ‘butlers’ for autocrats. In Butler to the World, Oliver Bullough takes the U.K. to task. American Kleptocracy, by corruption researcher Casey Michel, gives the U.S. the same treatment as Bullough gives the U.K. In Enablers, the international financier class is taken to task by Frank Vogl, a former economic journalist and communications adviser to financial institutions who laments what has become of the professions he has spent a lifetime working for.
Networking events have people wondering if they lost their schmoozing abilities
Networking-starved professionals are returning to in-person luncheons and live conventions as Covid-19 cases fall. Some say they’ve missed rubbing shoulders and schmoozing so much that they’re turning up to events they once dreaded or only dutifully attended before the pandemic.
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