Tuesday Morning Reads
- Further Disrupt Global Supply Chains
- Relentless Selling
- Russia Is Spiraling Toward Default Nightmare
- Goldman CEO Says It’s Not Wall Street’s Job
- Gas Taxes Get Rolled Back Across U.S. as Pump Prices Soar
- Uber and Lyft Add Fuel Surcharges
- Why Your Electric Bill Is Soaring
- From Beer to Semiconductors
- Powell Admires Paul Volcker.
- Manchin Won’t Support Raskin for The Fed
- Investors See Risks Spiking, Fear Market-Wide Liquidity Crunch
- Discord Interviews Banks for Possible Direct Listing
- ‘No Code’ Brings the Power of A.I. to the Masses
- Oatly’s Growing Pains Trip Up Pioneer of Oat Milk
- After Walt Disney, Robert Iger Heads to the Metaverse
National Security Adviser Jake Sullivan and China's top diplomat, Yang Jiechi, met for seven "intense" hours in Rome on Monday, as the U.S. grows concerned over Chinese involvement in the conflict in Ukraine. Reports suggest that Moscow asked China for surface-to-air missiles, drones and armored vehicles as the lingering invasion exhausts its resources. The Kremlin denied the reports, saying it has ample supplies, while a Chinese spokesman also rejected the "malicious" rumors as "disinformation" before the meeting.
Quote: "Should they provide military or other assistance, that of course violate sanctions or support the war effort, there will be significant consequences," Press Secretary Jen Psaki told reporters. "In terms of what those specifics will look like, we would coordinate with our partners and allies to make that determination."
Response: "China is not a party to the crisis, nor does it want sanctions to affect China," Foreign Minister Wang Yi declared. "China has a right to safeguard its legitimate rights and interests."
At the meeting, the White House also warned Beijing not to bail out strategic ally and trading partner Russia, with a pending default on the cards for the nation. "President Putin is being put in a position to make choices about where he is going to have to put his financial resources," stated Deputy Treasury Secretary Wally Adeyemo. "They're in a position where they are going to have to make choices about what debts they pay going forward and those choices will ultimately put him in a position about whether he continues the invasion."
Market angle: Panic selling of Chinese equities has taken hold over the last couple of sessions as coronavirus cases continue to surge in the country, with Dongguan (the fifth-largest contributor to China's GDP) now under lockdown. Stocks in Shanghai plunged 5% overnight and shares in Hong Kong sold off another 5.7%, while Beijing's closeness to Moscow is not helping the situation. Investors are even staying away from the dip-buying opportunity despite Chinese shares being off 40% from a year ago levels. (16 comments)
Inflationary pressures are being felt everywhere, from the production line to consumers' pockets. For the second time in less than a week, Tesla (NASDAQ:TSLA) is raising prices in the U.S. and China to cope with the cost of raw materials. Prices have surged in recent months, from aluminum and palladium used in bodywork and catalytic converters to nickel and lithium that power EV batteries.
Quote: "Tesla & SpaceX are seeing significant recent inflation pressure in raw materials & logistics. And we are not alone," Elon Musk tweeted earlier this week, before challenging Vladimir Putin to a duel over Ukraine.
The latest increases saw Tesla raise prices for all its American (and Chinese) models by 5%-10%. Its cheapest vehicle, the Model 3 Rear-Wheel-Drive, even went up $2,000 to $46,990. Last week, the company raised prices of its U.S. Model Y SUVs and Model 3 Long Range sedans and some China-made Model 3 and Model Y vehicles.
Supply chain complications: CNBC on Monday reported that Tesla bought "millions of euros worth of aluminum" from Rusal, the Russian metals giant founded by sanctioned oligarch Oleg Deripaska. The transactions go back to 2020, though there's no indication that Rusal aluminum has been used in U.S. production. Its willingness to work with Russian suppliers is also not unusual. Almost all of the world's biggest automakers buy from at least one tier-1 supplier in Russia, according to global supply chain research firm Interos. (5 comments)
Facebook parent Meta (NASDAQ:FB) opened a can of worms last week after temporarily easing its hate speech policies. The social network allowed posts calling for violence against Russian soldiers, and even the death of Vladimir Putin or Belarus' Alexander Lukashenko, in the context surrounding the invasion of Ukraine. The policy, which kept up related posts unless they included "method and location," was only applied to users in Ukraine, Russia and surrounding countries, but has since been modified.
Clarification: Facebook is "narrowing the focus" of the guidance to make it "explicitly clear that it is never to be interpreted as condoning violence against Russians in general." Users will also not be allowed to share a post that "calls for the death of a head of state" - likely a reference to Russian President Vladimir Putin.
"I want to be crystal clear: our policies are focused on protecting people's rights to speech as an expression of self-defense in reaction to a military invasion of their country," tweeted Meta President of Global Affairs Nick Clegg. "The fact is, if we applied our standard of content policies without any adjustments we would now be removing content from ordinary Ukrainians expressing their resistance and fury at the invading military forces, which would rightly be viewed as unacceptable."
Flashback: Following the invasion of Ukraine, Facebook blocked Russian state media RT and Sputnik in Europe, as well as all advertising from Russian businesses. Emails also showed that Meta allowed praise of the far-right Azov battalion, which are accused of harboring neo-Nazi and white supremacist ideology. In response to Meta's content policy decisions, Moscow closed off Facebook and Instagram for some 80M users across the country, while cracking down on other tech companies like Twitter (NYSE:TWTR). The violence still continues on the ground, with Russian forces shelling residential neighborhoods in Kyiv on Monday night as negotiators from the two countries prepared for a fresh round of ceasefire talks. (6 comments)
In a pivotal moment for Democrats in the 50-50 Senate, Sen. Joe Manchin (D-WV) has revealed that he couldn't support the nomination of Sarah Bloom Raskin, citing her progressive views of climate risks. "Her previous public statements have failed to satisfactorily address my concerns about the critical importance of financing an all-of-the-above energy policy to meet our nation's critical energy needs," he wrote on Twitter. Raskin was slated to become the Fed's Vice Chairwoman of Supervision, or the government's most influential overseer of the American banking system.
Commentary: "Unless there is a white knight hiding somewhere in the Republican caucus, it looks like Raskin's nomination is effectively toast," said Isaac Boltansky, director of policy research at brokerage firm BTIG.
The delay not only affects Raskin, but prolongs the confirmation process for Jerome Powell's second term, as well as Lisa Cook and Philip Jefferson for Fed governor seats. Democrats had hoped to confirm all of them as a package, but Manchin's decision could push the Biden administration to ditch Raskin. The GOP had previously flagged concerns about her business dealings, and their absence from a vote in February meant the necessary quorum was not there to confirm the nominees.
Go deeper: After leaving her role as Deputy Treasury Secretary, Raskin went on to lobby Kansas City Fed President Esther George in 2017 on behalf of fintech Reserve Trust, looking to score a special account at the central bank (it previously denied access to its payments system). Following her personal intervention, the Kansas City Fed approved the company's second request in 2018, but it maintains the reversal was not the result of Raskin's call. Having a "master account" still remains Reserve Trust's largest selling point to customers and it even advertises as such on the homepage of its website. (5 comments)
In Asia, Japan +0.2%. Hong Kong -5.7%. China -5%. India -1.3%.
In Europe, at midday, London -1.1%. Paris -1.8%. Frankfurt -1.7%.
Futures at 6:20, Dow -0.3%. S&P -0.3%. Nasdaq -0.2%. Crude -6.2% to $96.62. Gold -1.5% to $1930.90. Bitcoin -1.1% to $38,630.
Ten-year Treasury Yield -4 bps to 2.10%
Today's Economic Calendar
What else is happening...
Governors call for a pause on the federal gasoline tax.