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Wells Fargo CFO: Economy will continue to slow

NEW YORK, Sept 13 (Reuters) – Wells Fargo & Co is seeing loan growth moderating after strong growth so far this year and witnessing downward pressure on mortgage revenue as consumers feel the effect of higher interest rates, its chief financial officer said on Tuesday. “There will be stress right as the economy slows. So that’s going to come in terms of some of these portfolios. It’s just so far it is weathering quite well,” said Mike Santomassimo at the Barclays investor conference. His comments came after the chief financial officer of U.S. Bancorp said at the same conference on Monday that he expects a 30% to 35% drop in mortgage revenue in the third quarter from the second quarter as the housing market slows.

Hopes of a landing soft enough to avoid recession is waning as the US central bank remains steadfast in its decision to keep raising rates until data shows a pullback in consumer prices.

U.S. consumers and businesses are still in good financial shape despite high inflation and concerns about a looming recession, some of the nation’s top bankers told a conference in New York last week. “The Fed is tightening a little bit more than what we were expecting,” said PNC Financial Services Group Chief Financial Officer Robert Reilly. The bank was seeing a 40% chance of a recession in 2023 but even if it were to happen, it would be a “shallow” one, Reilly added. Santomassimo cautioned that the macroeconomic environment is affecting lower-income segments of the population, even though that segment is a smaller portion of the bank’s business. “It’s not going to be a significant driver. But you’re starting to see that and that’s what you should expect to see, given the inflation that we’ve seen,” he said. Santomassimo said the bank is witnessing strong net interest income because of higher rates. “We still feel really comfortable about the 20% increase on a full-year basis,” he said. While the bank has seen 5% growth in loans so far this year, that growth is moderating from the second quarter, Santomassimo said.

UBS: Fed’s economic plan is not achievable

Investors cheering a slowdown in US inflation are failing to account for rising credit card debt, falling house prices and higher borrowing costs which will bring the US economy to a halt and force the Federal Reserve to reverse its monetary policy course this year. The Fed is still aiming for a soft landing, meaning a desired slowing in the economy, but has admitted a risk of a contraction. “We were in the soft landing camp for most of last year, but the path to that unfolding has narrowed considerably with the data coming since September,” said UBS chief economist for the US, Jonathan Pingle, in an interview with The Australian Financial Review. A soft landing would require robust employment, slowing inflation, and the Fed to ease off the brakes, he said. Mr Pingle believes the Fed’s economic forecasts, which include a somewhat “painlessly” higher jobless rate, are simply not achievable. “Mathematically, given the US demographics, you’re probably going to need outbreak job loss to generate the magnitude of increases in the unemployment rate that they have in their economic projections,” he said. “Trying to have an increase in the unemployment rate and inflation fall and do so painlessly – I think it’s impossible.” The UBS economist believes something has to give.

UBS is forecasting a hard economic landing, projecting a contraction by Easter.

It expects real GDP to drop 0.9 per cent by the end of 2023 before rebounding in 2024 to reach 2.9 per cent in 2025. The investment bank anticipates unemployment to increase 2 percentage points by next year to a peak of 5.5 per cent. The jobless rate stands at a five-decade low of 3.5 per cent. Even so, Mr Pingle said it would be among the “mildest labour market recessions” experienced in the US, estimating that a 1 percentage point decline in real GDP meant 1.5 million jobs lost. But the scale would be enough for the Federal Reserve “to do something about it”. In the last recession during the 2008 global financial crisis, unemployment climbed to 6.3 per cent. And if history is any guide, the Fed has little tolerance for outright job losses. A major reason for the downturn is the unsustainable pace of retail spending as consumers keep their pandemic shopping habits. “US households look like they’re consuming well beyond their income and that spending is going to slow sharply in the coming months,” said Mr Pingle. Credit card balances surged 80 per cent at an annualised rate in November and the pile of bank savings is plunging. On top of those tensions, there is an acute correction in house prices with rents starting to fall and slowing activity in construction.

And yet, the worst is still to come with the effect of the Fed’s monetary tightening to be fully felt in 2023.

The Fed last year raised its policy rate by 4.25 percentage points from near zero, the fastest tightening pace in decades. In December, it projected at least an additional 0.75 percentage points of increases in borrowing costs by the end of this year. The central bank raised rates by 0.75 percentage points four times last year, before slowing to a 0.5 percentage point increase in December. Its policy benchmark stands at a mid-point of 4.37 per cent. Fed officials have pencilled in a policy peak of 5.1 per cent, where it is likely to stay for an extended period, but financial markets expect fewer interest rate increases for a top of 4.9 per cent.  Bond futures ascribe a 91 per cent probability to the Fed lifting its benchmark rate on February 1 by 0.25 percentage points. For the first time, they give a small probability of no move in March. Mr Pingle noted that with inflation starting to turn and at a faster clip than the Fed projected, the central bank would change its rhetoric soon. “I expect them to be hawkish in February and a little less hawkish in March. By May, they’re going to be comfortable with the work they’ve done,” he said. The economist said the Fed’s 2022 inflation projection now looked too high and would have to be revised lower. Last week, data showed US consumer prices unexpectedly fell for the first time in more than 2½ years in December, suggesting that inflation is now on a sustained downward trend. The consumer price index dipped 0.1 per cent last month after gaining 0.1 per cent in November. That was the first decline in the CPI since May 2020. In the 12 months, the CPI increased 6.5 per cent. Still, inflation remains well above the Federal Reserve’s 2 per cent target.

 

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More classified documents found at Biden’s Delaware home

 

  • dditional classified government documents were found at President Joe Biden’s Delaware home this week, the White House confirmed Saturday.
  • A total of six pages of documents with classification markings were discovered at Biden’s Wilmington residence, Biden’s special counsel said in a statement.

Additional classified government documents were found at President Joe Biden‘s Delaware home this week, the White House confirmed Saturday. In a statement, Richard Sauber, White House special counsel, said that a total of six pages of documents with classification markings were discovered at Biden’s Wilmington residence. The White House previously said that only one page was found there. The first document was identified on Wednesday by Biden’s personal lawyer and turned over, and the additional five documents were discovered later that week, Sauber said. “The DOJ officials with me immediately took possession of them,” he said in the statement. Sauber said the president’s lawyers have acted “immediately and voluntarily” to provide the documents to the Department of Justice. The disclosure of the latest discovery comes days after Sauber confirmed media reports that attorneys for the president found an initial batch of classified documents from the Biden administration on Nov. 2 in an office that Biden had used as a private citizen at a Washington think tank. That was nearly three months after FBI agents raided the Florida residence of former President Donald Trump and seized more than 100 classified government documents and hundreds of more records that federal prosecutors say belong to the U.S. government. Trump is the focus of a criminal probe by the DOJ for his removal of the records from the White House in January 2021. Sauber disclosed Thursday that a second batch of documents had been found in Biden’s Delaware home. He issued a statement detailing how and where the second batch of documents was found and said a “small number” of records with classified markings were found in the garage.  According to a statement Saturday from Biden’s personal attorney Bob Bauer, the second batch of documents was discovered in the garage of Biden’s Delaware residence on Dec. 20. The president’s attorneys conducted another search of the home to look for other classified materials beginning Wednesday, which is when they found the additional records in a room adjacent to the garage. Bauer said that Biden’s personal attorneys are working to balance public transparency and the limitations necessary to “protect the investigation’s integrity.” Bauer said the attorneys do not have security clearances, which means they are not aware of the exact number of documents or their content. He said that when an attorney discovered a document with classified markings, they stopped, notified the government, and did not review it. “Adhering to this process means that any disclosure regarding documents cannot be conclusive until the government has conducted its inquiry, including taking possession of any documents and reviewing any surrounding material for further review and context,” Bauer said. By law, government records must be given to the National Archives when a president or officials in their administration leave office. Attorney General Merrick Garland on Thursday appointed former federal prosecutor Robert Hur as special counsel to investigate the discovery of these classified records. Hur is authorized “to investigate whether any person or entity violated the law in connection with this matter,” Garland said in a public statement he made on the appointment at the Department of Justice. Soon after the second discovery, Biden discussed the documents with reporters. “As I said earlier this week, and by the way, my Corvette is in a locked garage, so it’s not like they’re sitting out on the street,” Biden said, referring to the documents.“People know I take classified documents and classified materials seriously,” Biden said. “I also said we’re cooperating, fully cooperated with the Justice Department’s review.”

NN: How serious does Biden take classified documents?….. When he claimed its ok because they were secure in his locked garage with his Corvette. Where do we find these idiots……. REALLY!

 

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Germany expands COAL MINE……. GREENNIEES shitting all over themselves

Please observe in the video below the windmills under the coal field….. ill explain later

ERKELENZ, Germany (AP) — The fate of a tiny abandoned village has sparked heated debate in Germany over the country’s continued use of coal and whether tackling climate change justifies breaking the law. Environmental activists have been locked in a standoff with police who started eviction operations on Wednesday in the hamlet of Luetzerath, west of Cologne, that’s due to be bulldozed for the expansion of a nearby lignite (notice how they do not use the world coal) mine. Some stones and fireworks were thrown at officers in riot gear as they moved into the village, clearing roadblocks and removing protesters. Activists had refused to heed a court ruling Monday effectively banning them from the area. Some dug trenches, built barricades and perched atop giant tripods in an effort to stop heavy machines from reaching the village, before police pushed them back by force.

“People are putting all of their effort, all of their lives into this struggle to keep the coal in the ground,” said Dina Hamid, a spokesperson for the activist group Luetzerath Lives.

“If this coal is burned, we’re actually going to take down our climate goals,” she said. “So we’re trying to, with our bodies, protect the climate goals.” The debate flared up hours later at a townhall meeting in nearby Erkelenz, when one regional official accused activists of being willing to “spill human blood” to defend the now-abandoned village. Stephan Pusch, who heads the district administration, said that while he sympathized with the protesters’ aims, the time had come to give up Luetzerath. The village’s last resident left in 2022 after being forced to sell to utility company RWE. “You’ve achieved your goal. Now clear the pitch,” he said to jeers from the room. Many disagreed, arguing that the village is more than just a potent symbol for the need to stop global warming. Studies indicate that about 110 million metric tons of coal could be extracted from beneath Luetzerath. The government and RWE say this coal is needed to ensure Germany’s energy security — squeezed by the cut in supply of Russian gas due to the war in Ukraine. Critics counter that burning so much coal would make it much harder for Germany, and the world, to cap global warming at 1.5 degrees Celsius (2.7 Fahrenheit) as agreed in the 2015 Paris climate accord. “Nobody wants to be out there in the cold right now, defending a forest or a village,” said Maya Rollberg, a 26-year-old student who had traveled from southern Germany. “But I think that people have realized that they have to do that in order to (protect) future generations.” Pusch, the regional administration chief, warned protesters that intentionally breaking the law wouldn’t help their cause in a country where the violent seizure of power and the horrors of dictatorship are still within living memory. “I’ll tell you honestly that I’m scared my children will grow up in a world that isn’t worth living in anymore,” he said. “But I’m at least as scared of my children growing up in a country where everyone takes the law into their own hands.” “You won’t save the world’s climate on your own,” said Pusch. “(We’ll) only do so if we manage to take the majority of the population with us.” Similar debates over how far civil disobedience can go have taken place in Germany and elsewhere in recent months amid a wave of road blockades and other dramatic actions by protesters demanding tougher measures to combat climate change. Some climate activists say the law is ultimately on their side, citing a 2021 ruling by the country’s supreme court that forced the government to step up its effort to cut emissions. They also note the legally binding nature of Germany’s commitments under the Paris accord. Wissler criticized an agreement struck last year between the government and utility company RWE to permit mining beneath the village in return for an earlier end to coal use in Germany. Some experts say that, in sum, the deal will lead to higher emissions.

NN BlaskMask Blog:

Its Not An Abandoned Town.. But a failed Wind Farm

Here’s Gretta: On climate, racial and Social Justice….. Really! yes and Germany is the biggest polluter in the world? really really? How come i hear nothing about India and China?

 

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Fed is still seeing $2.2 trillion in daily demand for its overnight repo facility

The U.S. government needs to strike a debt-limit deal before surging demand for the Federal Reserve’s popular overnight reverse repo facility will ease, BofA Global’s rates team said Friday. While the Fed slowley cut its balance sheet to about $8.5 trillion from a near $9 trillion peak to battle high inflation, its popular overnight reverse repo facility has continued to see over $2 trillion in daily demand as investors keep cash tucked away at banks in the wake of last year’s bear market in stocks and bonds. The Fed’s repo program lets eligible firms, like banks and money-market mutual-funds, park large amounts of cash overnight, while lately earning 4.3%, up from 0.5% in March. Use of the Fed’s facility hit a record of about $2.5 trillion in late December (see chart), a time of year when liquidity in financial markets has been prone to run thin.

Fed’s reverse repo facility continues to see $2 trillion in daily demand as financial conditions tighten.

New York Federal Reserve data

Now, the expectation is that it will take a breakthrough in Washington on government debt before the Treasury can resume selling Treasury bills to soak up demand from investors, and allow demand for the central bank’s overnight reverse repo facility to decline. Treasury Secretary Janet Yellen warned top U.S. lawmakers on Friday that the government is expected to hit its debt limit next week. The Treasury will need to start taking “extraordinary measures to prevent the United States from defaulting on its obligations,” she wrote in a letter. BofA Global’s Mark Cabana said in a Friday note that a common question his rates strategy team has been getting in 2023 has been how to make sense of the debt-limit fight as the Fed drains liquidity from the banking system as its balance sheet shrinks. His team’s “short answer” is that the Fed’s shift to a smaller balance sheet since May has been mostly reflected in a lower Treasury cash balance at the Fed. But his team also thinks reliance on the reverse repo facility “should drop sharply,” once the government agrees to a new borrowing limit, and a “wave” of Treasury bill supply follows. It currently has a $31.4 trillion borrowing limit. The Fed’s repo facility had nearly no customers for years until the pandemic hit. Demand began to pick up in April 2021, when short-term funding rates were next to nothing. Use has continued to rise even after the Fed in March began to dramatically raise rates and as assets roll off its balance sheet. Higher Treasury yields have been a result of the Fed raising its policy interest rate sharply since last year to combat inflation. The 2-year Treasury rate BX:TMUBMUSD02Y was at 4.19% on Friday, according to FactSet. The 10-year Treasury yield BX:TMUBMUSD10Y was at 3.49%, after falling as low as 0.54% in 2020.

 

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BofA Strategists Say US Stocks Set For 10% Drop Before Later Rally

US stocks are poised for a fresh slide before ultimately rallying in the second half of the year when economic conditions stabilize, according to Bank of America Corp. strategists. Investors are positioned for the S&P 500 to tumble nearly 10% to 3,600 points before rallying 17% to the 4,200 level, strategists led by Michael Hartnett wrote in a note. Trading during an economic and earnings recession “requires patience,” they said. The “pain trade” will last until a trough in Fed rate forecasts, yields and credit spreads signals “peak Goldilocks” — describing a steady economy that is not running too hot or too cold. Global stocks gained at the start of this year amid optimism fueled by China’s reopening, cooling inflation and expectations that central banks will take a less aggressive approach to tightening. Still, strategists are increasingly favoring European and Asian shares over US peers against the backdrop of higher rates. Hartnett said the outperformance of European stocks versus the US was the “start of an era” last week while Goldman Sachs Group Inc. peers said the Chinese stock rally has more room to run. “S&P 500 earnings revisions point to a hard landing” even though the market is pricing a soft landing, Goldman Sachs strategists led by David Kostin wrote in a note late Thursday. If there is no recession, as the team expects, S&P 500 earnings per share growth will be flat this year, they said.

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Yellen warns of U.S. default risk by early June, urges debt limit hike

WASHINGTON, Jan 13 (Reuters) – U.S. Treasury Secretary Janet Yellen said on Friday the United States will likely hit the $31.4 trillion statutory debt limit on Jan. 19, forcing the Treasury to launch extraordinary cash management measures that can likely prevent default until early June.

“Once the limit is reached, Treasury will need to start taking certain extraordinary measures to prevent the United States from defaulting on its obligations,” Yellen said in a letter to new Republican House of Representatives Speaker Kevin McCarthy and other congressional leaders.

She urged the lawmakers to act quickly to raise the debt ceiling to “protect the full faith and credit” of the United States. “While Treasury is not currently able to provide an estimate of how long extraordinary measures will enable us to continue to pay the government’s obligations, it is unlikely that cash and extraordinary measures will be exhausted before early June,” the letter said. Republicans now in control of the House have threatened to use the debt ceiling as leverage to demand spending cuts from Democrats and the Biden administration. This has raised concerns in Washington and on Wall Street about a bruising fight over the debt ceiling this year that could be at least as disruptive as the protracted battle of 2011, which prompted a brief downgrade of the U.S. credit rating and years of forced domestic and military spending cuts. The White House said on Friday after Yellen’s letter that it will not negotiate over raising the debt ceiling. “This should be done without conditions,” White House spokesperson Karine Jean-Pierre told reporters. “There’s going to be no negotiation over it.” House Republicans are planning to move a “debt prioritization” measure by the end of March that would call on the U.S. Treasury to continue making certain payments once it reaches the debt ceiling, but details have not been finalized, a person familiar with the plan told Reuters. The proposal was first reported by the Washington Post. Republican lawmakers in the United States House of Representatives are preparing a contingency plan that would be put into place if a deal on raising the debt ceiling fails, the Washington Post reported. According to six unnamed sources, the plan is part of a deal conservative Republicans reached with Kevin McCarthy during his campaign for speaker of the House. The report claimed that, if the debt ceiling is breached, Republicans “would call on the Biden administration to make only the most critical federal payments,” including debt payments, social security and Medicare, and military funding. Two people familiar with the discussions said that “it could take weeks for Republicans to decide which federal spending programs must be protected.” NN: I normally do not comment on the debt ceiling charade. But with the new Republicans that have blown into town and the weak speaker this could blow into a big deal!

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1 Billion people infected with COVID in China….. Critical to our BINARY trade in oil

A study by Peking University, Beijing, China says about 900 million Chinese people have been infected with coronavirus as of Wednesday, 11th January, 2023. According to BBC, the report estimated that 64% of China’s population has the virus. It ranked Gansu province, where 91% of the people are reported to be infected, at the top, followed by Yunnan, (84%) and Qinghai (80%). The BBC report disclosed that a top Chinese epidemiologist has also warned that cases will increase in rural China over the lunar new year.

It also said the peak of China’s Covid wave is expected to last two to three months, added Zeng Guang, ex-head of the Chinese Center for Disease Control. Hundreds of millions of Chinese are travelling to their hometowns – many for the first time since the pandemic began – ahead of the lunar new year on 23 January.

China has halted offering daily Covid statistics since abandoning zero-Covid.

But hospitals in big cities – where healthcare facilities are better and more easily accessible – have become crowded with Covid patients as the virus has spread through the country. Speaking at an event earlier this month, Mr Zeng said it was “time to focus on the rural areas”, in remarks reported in the Caixin news outlet. Many elderly, sick and disabled in the rural areas were already being left behind in terms of Covid treatment, he added. China’s central Henan province is the only province to have given details of infection rates –

earlier this month a health official there said nearly 90% of the population had had Covid, with similar rates seen in urban and rural areas.

However, government officials have said many provinces and cities have passed the peak of infections. The Lunar New Year holidays in China, which officially start on 21 January, involve the world’s largest annual migration of people. About two billion trips are expected to be made in total and tens of millions of people have already travelled.

NN BlackMask Blog: Killing The Old Folks:

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Cooler Inflation Mixed With Strong Labor Data Leaves Traders Puzzled

Inflation data slowed in December, as widely expected, but labor market data remained strong, with both initial and continuing claims coming in lower than expected. Wall Street struggled to weigh how each would affect future rate hike decisions for the Federal Reserve.  In premarket trading and then at the open, the S&P 500 Index struggled for direction, while two-year Treasury yields fell.  “Even though everything is coming in line with expectations, equities are still disappointed because people were expecting a below-expectations CPI report, and that didn’t happen,” said Zhiwei Ren, portfolio manager at Penn Mutual Asset Management. “The easy part of the decline in inflation may be underway — goods inflation is declining, commodity prices are falling,” Priya Misra, global head of rates strategy at TD Securities told Bloomberg TV. “The much harder part is getting that service inflation down consistent to 2%.”

Stocks Waver | S&P 500 futures gain after falling in immediate aftermath of CPI report

Here’s what others on Wall Street said:

Danni Hewson, financial analyst at AJ Bell:

“The trouble with US inflation numbers coming in bang on target is that markets had been surfing a wave of optimism that the numbers might just come in even cooler. And when you poke under the hood a little more, it’s clear a lot of the movement is down to falling prices at the pump.”

“Markets are likely to have a hard time figuring out how to react to today’s numbers, because although the headline is a good one there are still big issues to contend with, not least continued rises in the cost of food and shelter but also the fact that services are running hot. And when you mix in the latest jobs data, there’s plenty to befuddle.”

Cliff Hodge, chief investment officer for Cornerstone Wealth:

“The CPI report was bang-on this morning, and while the initial reaction in risk assets was weak, futures are moving higher.”

“The labor market is still very tight, though the claims data should be taken with a grain of salt due to the noise in holiday adjustments.”

Maria Vassalou, co-chief investment officer of multi-asset solutions at Goldman Sachs Asset Management:

“The market has priced in a very optimistic scenario about CPI in the previous days. The numbers came in at exactly the expectations level. That means that some of the optimism in the markets may get unwound both in equities and fixed income.”

“While a 25bps hike in the next Fed meeting is still in play, the strength of housing in the core CPI and the benign jobless claims support the scenario of a 50bps hike in the next meeting. However, what matters most for the markets is the terminal Fed rate, not so much the pace of hikes. As we get closer to the terminal rate, the pace of hikes needs to slow down.”

Mike Bailey, director of research at FBB Capital Partners:

“This is the number one pain point for Jay Powell, and we now have two big data sets suggesting that wages are fading. In some ways, today’s CPI is scratching that itch, and Powell may decide to gradually pull back on tightening.”

Guillermo Hernandez Sampere, head of trading at asset manager MPPM GmbH:

“The CPI data could motivate the Fed to make smaller amendments to their path and go toward a slower tightening. Anyway, the market will give another name to the monster in the closet, talks about possible recession will take over.”

Dennis DeBusschere, founder of 22V Research:

“Rents went up month over month. And new lease turnover is crashing. Rents will fall. We know that. So the OER will be faded. Bottom line: internals or the things the Fed are focused on are better than the headline CPI reading.”

Lindsay Rosner, multisector portfolio manager at PGIM Fixed Income:

“Shelter still remained high, but forward probabilities of hikes haven’t budged. This was a number that worked for market expectations.”

Timothy Graf, head of macro strategy for EMEA at State Street Bank & Trust:

“This is continued decent news in terms of the broader inflation trend, but that the stickiness in shelter-related inflation and services inflation means inflation here isn’t coming down fast enough for the Fed’s liking.”

“The Fed should have reason to step down to 25bps at some future meeting and then pause shortly thereafter. I think what this number does is probably extend that time horizon a bit.”

John McClain, portfolio manager at Brandywine Global:

“The risk-reward was highly skewed going into the print, with the market heavily leaning toward a weaker print. While we are moving in the right direction, the markets euphoria will take a pause for a cup a coffee. The data gives the Fed another point of reference and probably won’t dissuade them from their current thinking.”

Ipek Ozkardeskaya, senior analyst at Swissquote:

“Moving forward, inflation will  probably not ease steadily, and smoothly throughout this year, as the Chinese reopening, and the rebound in energy and commodity prices as a result of it, hint at a bumpy ride. If the Fed officials don’t want to call victory prematurely, they could be tempted to hike by another 50bp in February.”

Andrea Tueni, head of sales trading at Saxo Banque France:

“Now the market will need some kind of fuel if it wants to continue to go higher.”

NN: the drop in the inflation rate to 6.5% is still a titty twister. An what everyone is forgetting in the coming months as Chin reopens inflation will INCREASE. China’s insatiable demand for oil and commoties like cooper,  aluminum and the like will breath new life into commodities inflation….

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China’s rapid reopening brings joy and woe for world markets

  • Investors hope reopening will counter Western recession risks
  • But commodities rally may keep inflation high
  • Thai baht, Chilean peso, European luxury goods tipped to win

Jan 13 (Reuters) – The rapid reopening of China’s economy from COVID lockdowns is brightening the outlook for global investors keen to leave behind one of their worst years on record, but may also fuel the inflationary pressures policymakers hope are abating. The impact of the reopening of the world’s second largest economy on financial markets, hit by double-digit losses last year as inflation and interest rates jumped, is critical. Being touted among the top buying bets on recovery hopes are emerging markets, commodity currencies, oil, travel and European luxury companies. No doubt, it will be a bumpy ride. COVID cases, deaths, and the economic hit to China from rampant infections are yet to play out and commodity prices are already rising, adding to inflation risks. For now investors are focused on the positives, anticipating more stimulus measures by Beijing and that the health crisis and economic hit to China will peak in the first quarter. “The reopening story is looking quite good and … there is a lot of credit and fiscal stimulus that China is putting into the system,” said Edward Al Hussainy, senior interest rate and currency analyst at Columbia Threadneedle, which manages $546 billion of assets. “That stimulus is finding its way into global asset prices.” China’s reopening also takes the sting out of recession risks. Goldman Sachs expects the euro zone economy to grow by 0.6% this year, versus a contraction forecast previously. Chinese demand “will offset that story in the West…” that consumer demand and business spending have been slowing down as interest rates have gone up, said Chris Iggo, chief investment officer for core investments at AXA Investment Managers. But a boost from China’s reopening raises some concerns about inflation. China is the world’s leading importer of oil and many other commodities — oil prices have risen 10% since mid-December to almost $84 . “One thing that we need to be sensitive to is whether the recovery in China adds to global inflationary pressures,” AXA’s Iggo said. He added that the reopening could prompt the European Central Bank to raise rates for longer since euro area inflation is largely energy driven. The hope is that economic slowdown outside China will offset its rising demand for commodities, dampening the inflationary impact. Goldman Sachs estimates a return to normal travel and transportation behaviour in China could boost oil consumption by 1.5-2 million barrels per day.

Oil, copper surge as China reopens

NN: The above chart says it all. The fire breathing dragon is coming back an he will reignite the inflation fires.