Week InReview
Friday | Apr 22, 2022
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Photo illustration: Gabriel Zimmer | WSJ |
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THEY ARE in every office: the evangelists who urge colleagues to use less paper, recycle those Diet Coke cans and compost their food scraps.
They have held their tongues for the better part of two years, understanding (while silently bemoaning) the use of packaged, disposable everything as companies tried to minimize Covid risk.
Now, the office environmentalists have had enough.
— The Wall Street Journal
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U.S. stocks slid as the selloff in Treasuries resumed, with traders bracing for the possibility of more aggressive policy tightening by the Federal Reserve. The dollar gained. The S&P 500 dropped 1.5% in a dramatic reversal of a more than 1% rally in early trading Thursday on the back of upbeat earnings. The tech-heavy Nasdaq 100 fell about 2%, underperforming than main benchmarks, as the jump in yields weighed on growth-related stocks. (Bloomberg Markets | Apr 21)
The extra compensation investors are demanding to hold America’s most-speculative debt has risen around 50 basis points this month on concern economic growth is slowing and the chance of a recession is increasing. (BNN Bloomberg - Canada | Mar 19)
Investors in 10-year Treasuries can expect to earn real returns on their money for the first time in more than two years. The yield on 10-year inflation-protected Treasuries rose to as high as three basis points in Asia trading Wednesday. In a key step toward pre-pandemic normality, that signals the income on nominal 10-year notes is expected by investors to exceed average inflation over the coming decade. (Bloomberg Markets | Apr 20) see also Fed tightening sends U.S. ‘real yields’ to brink of positive territory (Financial Times | Apr 19)
U.S. government bonds sold off on Tuesday while stocks rallied as comments from Federal Reserve officials added to expectations of aggressive action from the central bank to rein in inflation. (Financial Times | Apr 19)
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Key takeaways from Powell, Lagarde remarks on IMF panel |
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2022 Spring Meetings of the International Monetary Fund (IMF) and the World Bank Group (WBG) are being held this week in Washington DC. |
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(Apr 21) — Here are the key takeaways from an International Monetary Fund panel discussion Thursday featuring Federal Reserve Chair Jerome Powell, European Central Bank President Christine Lagarde, Indonesia Finance Minister Sri Mulyani Indrawati, International Monetary Fund Managing Director Kristalina Georgieva and Barbados Prime Minister Mia Mottley.
- Powell reinforced market expectations and comments from other Fed officials for a half-point rate hike at the U.S. central bank’s upcoming May 3-4 meeting, saying such a move was “on the table.” He also emphasized the Fed’s focus on bringing inflation down and said the labor market was “too hot,” echoing comments he’s made before.
- Lagarde didn’t give much away in terms of what the next policy steps could be for the ECB. Asked about potential interest-rate increases, she pointed to the central bank’s June meeting as the moment to take decisions based on new data, while also reiterating that the euro-zone economy is in a different place than the U.S.
- Aside from monetary policy, there was a wide-ranging discussion on various topics like the impact of the ongoing pandemic and the war in Ukraine on the global economy. IMF’s Georgieva declared globalization is “not dead yet” despite the challenges it’s currently facing.
- Indonesia’s Indrawati said emerging markets need to brace for monetary tightening, but also suggested her own country was in a good position as it benefits from higher commodity prices and sports relatively low levels of foreign ownership of its debt. Barbados Prime Minister Mia Mottley argued global institutions need to come up with a better plan to address debt loads in developing countries that have accumulated during the pandemic through no fault of their own.
- Stocks initially spiked as Powell said a more aggressive rate hike for the Fed’s May meeting is under consideration, but reversed course, tumbling to session lows. The S&P 500 fell 0.87% as of 2:17 p.m. in New York. Treasuries pulled back, with the benchmark 10-year yield at 2.92%.
Source: Matthew Boesler and Alexander Weber | Bloomberg Government
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Financial stability risk grows as war muddles inflation fight |
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(Apr 19) — Russia’s invasion of Ukraine raises global financial stability risks as it complicates the efforts of the Federal Reserve and other central banks to combat persistently high inflation, according to Tobias Adrian, director of the International Monetary Fund’s monetary and capital markets department.
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“The war, amid an already slowing recovery from the pandemic, is set to test the resilience of financial markets and poses a threat to financial stability,” Adrian wrote in a post to the IMF blog Tuesday
- Central banks “must bring inflation back to target, mindful that excessive tightening of global financial conditions hurts economic growth”
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Given these heightened financial stability risks, any sudden reassessment and repricing of risk sparked from a possible intensification of the war or escalation of sanctions on Russia “may expose some of the vulnerabilities built up during the pandemic (surge in house prices and stretched valuations), leading to a sharp decline in asset prices”
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The Bloomberg U.S. Financial Conditions Index, a barometer of health in financial markets, shows they have tightened this year. The index is made up of money-market, fixed-income and equity indicators
Source: Liz Capo | Bloomberg Government
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The North Atlantic Treaty Organization, shown here gathering for a defense summit in March, is currently holding cybersecurity exercises in Estonia. A U.S.-based coalition is leading the simulations for financial institutions at the event. Photo: Valeria Mongelli | Bloomberg |
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NATO taps FS-ISAC to lead cybersecurity exercises
The U.S. financial services industry’s largest cybersecurity consortium is leading cyberdefense simulations in Estonia this week on behalf of NATO in what it bills as “live-fire” exercises designed to emulate realistic cyber incidents. The groups convened 2,000 participants from 32 nations for the annual Locked Shields event this year. The NATO Cooperative Cyber Defence Centre of Excellence (CCDCOE), which hosts the activities, tapped the Financial Services Information Sharing and Analysis Center (FS-ISAC) to lead the financial sector exercises.
Shields Up: U.S. officials preparing for potential Russian cyberattacks
This past week, the U.S. government issued an urgent warning about dangerous new malware that could cripple industrial systems worldwide. It comes on the heels of Ukraine withstanding an attempt by Russian hackers to knock out power to 2 million people in that war-torn country. The Biden administration has been releasing sensitive intelligence and dire warnings that the Kremlin is preparing to launch a new generation of cyberattacks on American soil. U.S. cyber defenders tell us they are now watching Russian state actors probe some of our most critical systems, and are bracing themselves – especially at the Department of Homeland Security – with an initiative called "Shields Up."
SEC cyber rule could trigger more attacks, experts warn
A new rule requiring U.S. asset managers to disclose more information about cyber attacks could be a boon for hackers, critics of the proposal warn. Investment firms must report any “significant cyber-security incidents” to the U.S. Securities and Exchange Commission (SEC) within 48 hours and “promptly” inform clients of any breaches under a rule proposed by the regulator on February 9.
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Elisabeth Moss in Mad Men. Photo: Jaimie Trueblood | AMC/Courtesy Everett Collection film still/Bridgeman |
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How the cocktail cart regained its cool
The cocktail trolley is back in vogue. Dolce & Gabbana has included one as part of its first homewares line. Meanwhile at the luxury design ecommerce site 1stdibs, sales are up 30 percent. “People are trying to recreate that experience of happy hour at home,” says 1stdibs editorial director Anthony Barzilay Freund. “And who doesn’t need some ‘happier’ hours these days?”
‘Severance’ and ‘Abbott Elementary’ are big hits — and reveal our complicated feelings about work
Where you still need to wear a mask in the U.S.
Airlines and airports, the ride-sharing company Uber and national train service Amtrak, are now lifting mask mandates that have been in place for more than a year. But the White House is still urging Americans to wear masks, however, and they are still required in some areas.
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